Why do ICNS files need to be perfect squares? im able to modify .app icons only when the dimensions are perfectly even (eg. 256x256) but not rectangular shapes.

this website allows for exporting png images as icns files in any dimension but they dont seem to work with .app's?

is it possible to modify an app to use a rectangular .icns?
No, that is not possible. macOS only supports square icons for this purpose.

The size must be either 16 × 16, 32 × 32, 48 × 48, 128 × 128, 256 × 256, 512 × 512, or 1024 × 1024.

Note that even though the physical dimensions of the icons must be square, it is possible to create the illusion of having a non-square icon by making parts of the icon transparent.