So in summary, after much consideration my opinion would be:

Yes, they materially participated

Yes, this is an active trade or business

No, I would not treat these as "start up" expense, just regular expenses.

If you are not comfortable treating them as regular expenses, then I would treat them as start up expenses.

Thanks, TaxMonkey, for your help.

It would be good to treat the expenses incurred prior to when the property was held out for rental, as regular expenses. However, I thought those expenses couldn't be reported as regular expenses. Do you have a cite or authoritative support for doing so?