function of how much air the cylinder can physically hold vs how much air is going into it.

VE is a function of the amount of the air in the cylinder in relation to the atmosphere. Density altitude can change the VE of an engine; that's why cold and dense air yields different results than hot thin air. It's also a theoretical number and not anything that is actually measured.

it it not possible for an engine to be more than 100% efficient in outright terms.

It most certainly is. Engines that are close to or over 1.5 hp/ci can easily go over 100%, especially if the intake runner length is tuned to the 2nd order harmonic. Many race engines are over 110% VE, some even over 120%. I have built and tuned plenty of n/a engines myself that were over 100% VE. Many years ago I worked on developmental 410 sprint engines that were over 120% VE.