1. Arbitrage works in the medium term to revert individual markets to the market-wide price, but in the short term, it can cost very little to manipulate low liquidity markets. Such lower liquidity market will always be cheaper to manipulate (pay off the arbitrage bots) than a highly liquid market or compared to the entire trading market of an asset (manipulating the market-wide price). The metric that matters here is the cost of attack, you don't need to manipulate a market for forever, just enough time to cause damage on any applications relying on that single market for data (see flash loan attacks as an example). Liquidity fragmentation lowers the cost of attack.

2. The security of a TWAP linearly scales with the time sample taken, so a 10 minute TWAP is indeed roughly 10x cheaper to manipulate than a 1 hour TWAP, all else equal. There will always be arbitrage bots, but a malicious actor with capital can simply revert any price movement caused by an arbitrage trade. Manipulating a market for 10 minutes means you need to pay off the arbitrage bots for 10 minutes, and scales proportionally with any timeframe.