Do you have a source for this? Any mainline (or whichever) dictionary pick this up yet? Because as far as I know, it's just a misunderstanding, which most people don't notice.
No, it is literal. It means that there exists every form of difficulty that you could enumerate in competing with them, except impossibility. It's possible in the way it's possible to shoot a bullet through a wall without either being damaged if their atoms are arranged in the right way at the right moment. It's not only literal, but very precise (and hyperbolic in that precision.)
So, when used, the phrase always literally refers to situations where precisely every possible difficulty is present aside from any that result in impossibility? You believe that??
Live by literal interpretation, die by literal interpretation.
> competition became all but impossible
This means competition became everything but impossible, no? So, possible.