> Why can't they buy >100% of the shares in exactly the same way they were able to sell >100% of the shares
When a company issues shares, there is a finite amount. It determines the the percentage of the company someone owns. So if there is 100 shares, you own 20, it would mean you own 20%. When a company goes public, they typically give, say 10%, to the market. So those 10 shares exist only. You either stock split or issues more shares. But issuing more shares would mean you own less percentage (and who would do that to themselves without a payoff).
You can buy more than 100% if you buy a financial instrument that has its underlying value tied to the company stock price (i.e. vanilla equity derivative), but its price is determined by the stock and not the other way around.
> Then they're back in the situation of being under 100% shorted
Let's say now there are 5 hedge funds that hold GameStock. Each has 20% (because hedge funds bet big, not small). The first one to cover will lose the least. You never want to be the last one because you lose the most and liquidity would be scarce because no one is willing to sell you their shares since its going up, meaning you would be double screwed. With each player that leaves, it causes a cascading effect.
> With such a large short interest it means that a motivated or coordinated buyer can force them to cover it at highly inflated prices, and that's their fault.
Yup.
edit:
The only people that can issue more shares without dilution is the Federal Reserve. They have a count of how much money is in flow, and can print money when need. But that only works if people believe in it. It hasn't been backed by gold in a long time. Otherwise, you will be in the same situation as some European countries prior to WW2 - hyperinflation (i.e dilution).