Re: Are regenerations still capped at 12?
It's not unreasonable. My read on the Master's reaction was more of "Oh. YOU guys would do that for ME?", rather than "Oh. You guys can DO that?", as if it were something they could do with the resources of Gallifrey at hand, where the Master could not do so otherwise (despite years of trying). I interpret it to mean that it wasn't a big deal if you were on the high council's good side.
Another thing that makes me not actually believe the council in that scene was that it was Borusa who delivered the line. Given what we would later learn about him, I'm not inclined to trust anything he said. As for the Master's reaction, I got kind of a "Yeah, right..." vibe from it.
"If the world was perfect, it wouldn't be." - Yogi Berra