The virtual AI within its virtual world

I like your second argument better. The first, I think, holds no water.

There are basically 2 explanations of morality, the pragmatic and the moral.

By pragmatic I mean the explanation that "moral" acts ultimately are a subset of the acts that increase our utility function. This includes evolutionary psychology, kin selection, and group selection explanations of morality. It also includes most pre-modern in-group/out-group moralities, like Athenian or Roman morality, and Nietzsche's consequentialist "master morality". A key problem with this approach is that if you say something like, "These African slaves seem to be humans rather like me, and we should treat them better," that is a malfunctioning of your morality program that will decrease your genetic utility.

The moral explanation posits that there's a "should" out there in the universe. This includes most modern religious morality, though many old (and contemporary) tribal religions were pragmatic and made practical claims (don't do this or the gods will be angry), not moral ones.

Modern Western humanistic morality can be interpreted either way. You can say the rule not to hurt people is moral, or you can say it's an evolved trait that gives higher genetic payoff.

The idea that we give moral standing to things like humans doesn't work in either approach. If morality is in truth pragmatic, then you'll assign them moral standing if they have enough power for it to be beneficial for you to do so, and otherwise not, regardless of whether they're like humans or not. (Whether or not you know that's what you're doing.) Explanation of morality of pragmatic easily explains the popularity of slavery.

"Moral" morality, from my shoes, seems incompatible with the idea that we assign moral standing to things for looking or thinking like us. I feel no "oughtness" to "we should treat agents different from us like objects." For one thing, it implies racism is morally right, and probably an obligation. For another, it's pretty much exactly what most "moral leaders" have been trying to overcome for the past 2000 years.

It feels to me like what you're doing is starting out by positing morality is pragmatic, and so we expect by default to assign moral status to things like us because that's always a pragmatic thing to do and we've never had to admit moral status to things not like us. Then you extrapolate it into this novel circumstance, in which it might be beneficial to mutually agree with AIs that each of us has moral status. You've already agreed that morals are pragmatic at root, but you are consciously following your own evolved pragmatic programming, which tells you to accept as moral agents things that look like you. So you say, "Okay, I'll just apply my evolved morality program, which I know is just a set of heuristics for increasing my genetic fitness and has no compelling oughtness to it, in this new situation, regardless of the outcome." So you're self-consciously trying to act like an animal that doesn't know its evolved moral program has no oughtness to it. That's really strange.

If you mean that humans are stupid and they'll just apply that evolved heuristic without thinking about it, then that makes sense. But then you're being descriptive. I assumed you were being prescriptive, though that's based on my priors rather than on what you said.

For one thing, it's possible to prohibit messing with someone's values

Only if you prohibit interacting with him in any way.

How about if I get some DNA from Kate Upton, tweak it for high sex drive, low intelligence, low initiative, pliability, and a desperation to please, and then I grow a woman from it? Is she my friend?

If you design someone to serve your needs without asking that you serve theirs, the word "friend" is misleading. Friendship is mutually beneficial. I believe friendship signifies a relationship between two people that can be defined in operational terms, not a qualia that one person has. You can't make someone actually be your friend just by hypnotizing them to believe they're your friend.

Belief and feeling is probably part of the definition. It's hard to imagine saying 2 people are friends without knowing it. But I think the pattern of mutually-beneficial behavior is also part of it.