Reason for squaring and not arbitrary exponentiation in Wesolowski and Pietrzak verifiable delay functions (VDFs)
Suppose I had an enormous exponent $B$. To compute $g^B\mod G$ (I'll omit &quot;mod $ G$&quot; from now on), I would use a square-and-multiply method: I would compute $g$, $g^2$, $g^4$,\dots, $g^{2^t}$, where $t$ is the bit-length of $B$, then multiply all $g^{2^i}$ for $i=1$ in the binary representation of $B$. Note that this involves, at most, $t$ squarings and $t$ multiplications (I'll assume squaring and multiplication take the same amount of time, which isn't exactly accurate but is good enough for this explanation), so the delay is at most time $2t$ times the time for a single square/multiplication.
However, the exact time is less clear; it will depend on the Hamming weight of G, how we store intermediate values, or whether we keep a running product of all $g^{2^i}$ that we have reached so far, etc. And note that we had to compute $g^{2^t}$ anyway to find $g^B$.
The proof of exponentiation for a big number shouldn't vary that much from the proof of repeated squaring. I'm also not sure the Pietrzak verification method works with arbitrary exponents (probably? but it will need some modification).
So basically, arbitrary large exponents should work, but it will be more complicated than just repeated squaring.
The generator cannot be an arbitrary number because it needs to change for every use. If the same generator were used in two different applications, someone could save all the values of $g^{2^t}$ and just look them up in memory the second time, and thus they would not have the required delay. The time-lock game in Definition 2 says that $g$ is uniformly random; the construction doesn't mention this but I think this is a basic assumption of all VDFs.