1. "That" refers to three hexes, not the unit's current position. The enemy unit cannot be closer than three hexes if at all possible.
2. The enemy unit is indeed compelled to move away if at all possible. If it's not possible, it doesn't and nothing happens to the enemy. That could mean it's forced to take a bad path that makes it enter bad terrain or what have you: it's trying to represent the idea that you're hounding and forcing the enemy back. Like a lot of abstractions, it can fall apart in play in specific circumstances, but the deck has a decent number of such abstractions and so you just have to accept those risks if you're choosing to play with it.