I know this has been asked before, but I could not find the answer.

For a particular set of tees to receive a round rating, does the setup need...
1) 8 PDGA members
2) 8 PDGA rated members
3) 8 PDGA rated members over 800
4) Other _______________

You need at least 5 members with ratings over 799 whose rating is based on at least 8 rounds (called propagators). You can get away with just 3 if the same course layout is played at least twice (2x3>5).

Thank you and I have a follow up question.

In the given Tournament: (2 rounds different tees per round)

If you have 3 members with a rating based on 8 rounds and 2 members with ratings based on 7 rounds, will the round of the current tournament in question be considered the 8th round needed for a player to be a propagator?

No. Propagators are based on the previous ratings update and are not dynamically produced while processing the events for the next update.