Ruby, as stated before in this thread, I believe its our definition of death are due for a drastic makeover. Some view viruses as encapsulated rogue DNA/RNA strands, but they are much more than that. Though inert, they are alive alright. As you said, their potential functionalism should define their living or dead status.
Because they can only make use of the equipment of living cells to replicate themselves, they are called obligatory intracellular parasites. Here are some illustrations of a T-even bacteriophage (host: E. coli) and its life cycle. It resembles a syringe, somewhat more complicated than our plastic variety, and is species specific. Again the chicken and egg question: Which of the two came first?
I find it hard to imagine that it would develop spontaneously by itself. Before anyone asks: Yes, I do believe viruses were designed and that with a fully functional, optimally tuned immune system, one would be able to resist any viral or bacterial attack.