this may need some clarification:
2] Morale Decay will "equalize" the kings' Value penalties with morale: for every point of Morale Decay, 1 point of each king's Value penalty is reduced.
I think this could refer to move decay or rule #1 / king decay, -25, or both
(My guess is it refers to the -1 value from #1, and acts as a measure for losing a king that has negative value, but there seem to be multiple 'valid' interpretations)
It is maybe a bit convoluted, but should be ok on a turn-by-turn basis. There might be some scenarios where multiple things are being threatened on a single turn that complicates it a little, but using ingame chat to track +/- may help. This would be a good time to have actual time control settings for custom games I suppose.
OK, I edited my original post -- I think/hope I clarified what I meant adequately, and yes, you were correct in your interpretation.
I also clarified a bit of #1... or I made it more opaque.