Since I will now be the host on Airbnb, does this count as materially participating and can I finally take the STR loophole? 

Home prices are still high, construction labor and materials, insurance is averaging 20% a year increases, interest rates, etc. 

Other side goes off on tangent, disorganized, no material facts, no evidence, done.

I've been an investor and broker for the last 10 years in FL and NC, and specialize in the mountain regions, and beach regions because that's where most of the tourists, and investors who want getaways, invest (certainly there are many other interesting markets to invest however, booming wine country for example..)To add to it, I love the environmentally responsible home building, that's something I've had an interest in for a while, and I've worked with several contractors and architects in the last few years to come up with a useful plan for alternative and environmentally responsible building materials. 

Assuming this is a passive business - meaning you are not materially participating - any cost segregation fueled losses would have no impact on your W-2 income. 

(actually exterior first, also lawn, landscaping) You can pay for the materials using money from your HELOC.

Could an inspector look at the house at that point and certify that there are no asbestos materials inside?

The only quick number there might be is doubling the cost of materials to add in labor, but that's not guaranteed - some jobs have few materials and a lot of labor and others are opposite. 

If you were to partner with another more experienced investor to purchase a short term rental, do a cost segregation, and "materially participate" then you could gain the benefits you are looking for without negatively cash flowing, and you could work out a deal where you maybe only have to materially participate for the first year to claim your tax benefits and then you can act as a more passive investor.

"Most" water damage claims can be fixed and closed within a few weeks or months, where a fire claim "may" take 6 months to 1 year to close out due to more extensive construction, delays in materials or labor, weather/seasonal delays, etc.