The word Live has different meanings to many.
In the case of sand and rock Live could simply mean that it has a coating of bacteria, this means to some that it is live sand or live rock and comands a high price.
In other instances Live could also mean not only that it has bacteria but pods as well.
Live could also mean that in the case of live rock it not only has bacteria and pods but other life as well, including feather dusters, coralline algae, macro or even micro algae, different types of worms,etc..
As long as your tank is cycled then it is alive, even the glass is alive with bacteria and perhaps algae.
Litterally you can start out with dry rock, dry sand and after a good cycle it will all be alive, with bacteria.
When people talk about seeding its a little different. The things you have in the tank can be alive, but seeding is more than just bacteria in many cases. Seeding is getting a cup of live sand or some good mature liverock with as much life in it as possible to help seed your tank with the pods, worms, chitons,astrena stars, and micro infauna as you can.
Least thats my opinion.
Having said all that then I would remove as much of the crushed coral as possible, replace with a fresh layer of livesand.
Thomas