I found this example in a textbook, and I understand the author's reasoning and I also reached the same answer using L’Hôpital’s rule. However, I have two issues:
Firstly: For any finite $a$, then as $x \rightarrow \infty$, $1-\frac{a^2}{x^2} \rightarrow1$, and 1 to the power of anything is 1, so shouldn't the answer be 1?
Secondly: If I try some form of estimation on my calculator by replacing $x^2$ with $10^{99}$, I also get 1 for any $a$ I use.

We are using that
$$\left(1-\frac{a^2}{x^2}\right)^{x^2}=e^{x^2 \ln\left(1-\frac{a^2}{x^2}\right)}$$
and $x^2 \ln\left(1-\frac{a^2}{x^2}\right)$ is an indeterminate form $\infty \cdot 0$ and since the Taylor's expansion for $\ln (1+t)$ as $t\to 0$ is
$$\ln (1+t)=t-\frac12t^2+\frac13 t^3-\frac14t^4+\ldots$$
the result follows.
As an intuitive explanation of the result and for the indeterminate form $1^{\infty}$, we need to consider that, in that case, while the base tends to $1^-$ the effect of the exponent is to make the quantity smaller towards zero. The final result is indeed a value in between that is $\frac1{e^{a^2}}$.
That's of course not always the case since all depends upon the rate of convergence to $1$ for the base and the rate of divergence for the exponent. We can indeed obtain any result between $[0,\infty)$ depending on that. That's why we define that an indeterminate form.
For example as $x \to \infty$
and as a consequence