Not OP, but this is something I spend a lot of time with. I have a pet framework called Zodeaism which means "Living Ideas". In my theory, the real "life forms" are ideas which possess the capabilities of information storage, adaptation, self-repair, and transmission. My own consciousness is mediated by thousands of such ideas, some competing and some working in harmony.
One such idea -- Do Good Onto Others As Others Do Unto You -- is an example of an extremely powerful and resilient idea which lives and operates in the brains of billions of individuals. It is powerful enough to ward off weaker ideas and has lived a long time without much modification to its original essence.
With that out of the way... I felt it was necessary to reduce agency to ability to use internal energy in order to put oneself in a higher energy state in the external world. This can be observed externally. I am standing next to a rock. I can jump up, spending some of my energy, and fighting against the potential energy well of gravity. I've increased my external energy state at the expense of some of my internal energy. Thus, a living being needs a way to store and use energy. You can observe this externally and conclude that I am alive, while the rock is either dead or inactive.
I consider such an act of "living" motion which can take another path than that of least resistance to be a "kin". In other words, any motion which is the result of a physical calculation (Zodeaism is compatible with determinism) and leads to an increase in external energy state. A kin is any such motion, large or small.
So now the problem becomes, what is the smallest kin we've observed in nature? Single-celled bacteria can expend energy in order to move through their environment against forces like friction and gravity, but a virus "rides the waves" if you will, never expending energy for things like respiration or locomotion. Any energy which is spent internally is potential energy like chemical or gravitational, released through a physical process without need for computation. I am unaware of anything smaller than a single-celled organism which produces such kins, but that doesn't mean they aren't out there. Even ethereal life forms such as ideas can produce these kins within the bodies of countless individuals across the planet, so physically local computational circuitry isn't a hard requirement.
So, according to this framework viruses aren't alive, however we can make the case that some machines are, except the experience is incomparable because of the advanced circuitry we contain which mediates our experience through things like emotion.
Yes to all three, when I was exposed to Friston's work I found many parallels in my own research and I would like to reach out to him when I've reached a more complete formalization of my ideas.
What do you think of his free energy principle and related concepts?
i haven't thought about it enough to even speculate, but one criteria would be the ability to make decisions, however simple.
viruses are entirely passive in their action. they're exquisitely complex structures (for what they are) existing entirely by chance that happen to have the property of self-replicating in the presence of the right cellular machinery. they don't decide to do anything, they just are, and therefore don't have agency.
Unfortunately, by your definition, computer programs are closer to being an individual than viruses. I am assuming that is not intended, so probably the idea needs more refinement.
I also think this is a weakness of the original article: a lot of things we probably shouldn't consider individual life forms would probably fit the definition (nations, for example).