Is it possible for one twin to deform another?

Even though the: Uterus expands remarkably, it's a small place. I've seen twins with skeletal impressions on their skulls from their womb-mate siblings. This is not frequent, but occurs.

Yes: Even without a twin, a fetus can assume an abnormal position within the womb, or have arms/legs in distorted positions. These can produce transient deformations in any newborn. The presence of a twin within the same space can increase the risk of such deformations. Thankfully, positional distortions like these often improve with help after the babies are delivered.