Question1

"Response: After you lose a challenge as the defender, kneel 2 influence to cancel the claim effect of that challenge. Then, choose an opponent to satisfy the claim of that challenge as if he or she had lost the challenge as the defender."

Does the defender have to declare a participating character for the challenge, for this card to work?

Question 2.

Can a lone character with a strength of 0, initiate an attack , or participate in a defence if he has the appropriate icons?

Both Answers are No

You can attack or defend with 0 strength

Strength is only relevant at the point of challenge resolution - you cannot win a challenge with zero strength and if the defending strength is zero the challenge is unopposed

Also in melee you may have a title which adds 3 to your total challenge strength (the +3 is not applied to any characters)

PS It is easier to read posts that do not use a black font!