Are you asking "how do you define life?" or "how do you separate organisms from each other?"? Regarding either question, I don't think anybody has a good answer, and that's what's so fascinating, because it really seems to be a metaphysical question rather than a scientific one.

> ...compulsion to shove things into neat little cubbies...

> So how do you classify life?

I believe that's the point.

I think the underlying point is that while humans have an extremely strong (and undeniably useful) urge to classify things into clean groups, not everything lends itself to being so classified. The human urge to classify things is what makes possible paradox like the sorites paradox.

Do we really need to classify it down to 8 taxonomic levels? At the last few levels I bet it tends to get really arbitrary. Or, we could have a variable-depth tree. Make it more specific only when you need to.

1) Dead.

2) Alive.

3) Somewhere in between.