The failsafe/wipe and timeouts are all implemented in software, and are still in Apple's control. They would be able to easily remove those restrictions without you needing to give up anything.
"The failsafe/wipe and timeouts are all implemented in software"
So is unlocking your phone, changing your password, decrypting your phone, etc. How is it easy for them to disable the failsafe wipe if they can't decrypt your phone (and presumable the settings file where that option is stored)?