Can the Wrack offer an impossible deal? Can the offer change?
First, let's make sure we are using the actual Eon texts (the ones given in another answer here are not the originals, as evidenced by the references to &quot;ships&quot; and &quot;encounters&quot;). Here are the originals:

You have the power to torture. As the offensive or defensive player, after alliances are formed, you may describe to your opponent a deal (see rules). If he refuses it you may torture him once for every token you have in the challenge. On each torture you put any one of his tokens into the warp, or one of his cards (drawn at random) into the discard pile. If at any time he accepts the deal, stop the torture and conclude the arrangement. If he never accepts, you have lost the challenge and he has won. Follow through with the outcome normally. If initially you elect not to torture, proceed with the challenge normally.
Super: You may stop torturing at any time before your limit is reached and continue with the challenge normally.

To answer your questions:

Nothing here says the deal has to be reasonable, or known to be possible. Wrack is not the Mind, so how could he even know with any certainty which deals are possible and which ones are not? While it might be easy to think that it's &quot;unfair&quot; for Wrack to dictate an impossible deal, this is not actually a problem. It's important to remember that if the opponent does not, or can not, accept the deal, then Wrack loses. He loses the challenge, loses his tokens, and (if he is the offense) loses the rest of his turn. He even loses the chance to get rid of a bad challenge card. A Wrack who constantly offers impossible deals is not using his power optimally.

The torture is iterative, but this doesn't mean Wrack can change the terms. The guys at Future Pastimes did (and still do) enjoy designing aliens and writing game text to be as flavorful as possible. The reason Wrack tortures one token at a time and gives the opponent another chance to accept after each token is for theme, drama, and tension. The logical thing would be for the victim to make the decision immediately and either accept all or none of the torture, but it doesn't always go down that way, as we will see in a moment. The definitive answer to this question was given by designer/editor Jack Kittredge in Encounter magazine, volume 1 number 6, on page 10:



from Dr. Robert Destro, Willingboro, NJ:
I have a question about the Wrack. Can he change his deal between token removal? ...
Ed: ... No, the Wrack can't change his deal because if he could he would propose something horrendous the first few tortures, and then become more reasonable toward the end. It is up to him to come up with something reasonable to start with. Rationally, the victim should consider it and accept or reject it right away and live with the decision. But there is a certain pressure once you actually lose a token or two that is hard to take. You do want the torture to stop. So I've seen a few deals at first rejected but then accepted after a torture or two.

There's probably an element of salesmanship skill here, too. If you are the Wrack, ideally you want to propose a deal that is good for you, torture a token or two, and then have your deal accepted. Some taunting, threats, chiding, pointing out unpleasant realities etc. along the way could theoretically help that happen.