Can't the income from individual room leases count when considering DTI?

Neither.You are giving away money with a 10 year mortgage, and zero cash flow defeats the purpose of being a REI.

With a lease to own contract could I pay them $17,000 per year towards equity in the home and have that count as a tax free gift so they are not taxed on that amt. as income?

Don't burn out, if you feel yourself getting down and defeated, take a step back breath then try again.

Started when I was 37 I am 40 now and now I am up to 13 units and counting have a plan and do not waiver from your plan, also build a good team to start and then look to improve and expand on the team.

Can I take these as deductions from my taxes since this money is invested in starting a business, or would it count as a personal expense and can't be written off? 

It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better.

So as long you are shopping the mortgage lenders within a 30-45 day period the bureaus recognize people need to be able to shop lenders so they typically only count this as one inquiry!

There's still a good chance you're wiped out or partially wiped out so I wouldn't count on seeing any of that money - then if you see some you'll feel better. 

Depending on what kind of other REO you have, there are some exceptions that do not count towards the 10.