The most important thing to remember is that our thoughts are a cumulation of, or an arrangement of what the mind has already perceived through the senses; mainly sight. One can imagine something that does not exist but only by arranging/reshaping objects that have already been set in the mind. In other words, no matter what monster you imagine, every aspect of that monster (down to the tooth) is something you have seen before.
Premise 1: This is where I believe the concept becomes fallacious. It presupposes the future and that we have reached the culmination of human thought.
It is possible for a human to live to a mature age without having seen fire. This person presumably can not imagine fire. It can not be concluded from an external perspective that fire does not exist. Therefore we can not conclude that we have experienced everything and that any one thing (or event) which we can not imagine, does not exist.
The premise seems likely but is not a certainty. Therefore the conclusion is already in jeapordy.
Premise 2: This is certain because the mind has never perceived the state of non-existance; there can be no concious mind without thought, and there can be no thought without concious mind. Therefore the state of non-existance is not conceivable.
Conclusion: Everything we can possibly imagine is a product of existance and it's correlation to the human mind, and therefore we can not imagine anything outside of existance. Once the mind ceases, so does thought, and existance.