In order for the text to trigger, must there be both a Lord and Lady in play?

Yes. There must be one of each.

Is there moment in time when both the Lord/Lady chosen to be killed and the Lord/Lady chosen to receive the power are on the board with the power awarded counting?

Scenario: I have the only Lord and the only Lady in play. Both have power from renown and I'm two power away from winning the game. The Red Wedding is revealed and so my Lord is selected to die and my Lady is selected to get the power. Will my Lord be in a moribund state at a moment when my Lady has received the power and can I count the Lord's power in that instant to hit my win condition before he is removed (along with his power from renown) from the board?

Yes, this is actually an example in the FAQ.

Heh. I guess its time for me to re-read the FAQ.

Okay so let me get this straight, even though a card is killed its power is stil in play for a couple of steps allowing you to win ?

Thats a bit confusing.

When your character is killed it enters the Moribund state. Players can play responses before this plot phase framework action windows closes, making all Moribund cards leaving play.

The moribund definition is from the FAQ :

A Moribund card (and its attachments) is considered to have been killed, discarded, returned to its owner's hand or deck, or moved to its owner's shadows area, but only for the purposes of triggering responses and passive abilities. This includes responses and passive abilities triggered by a card being placed in the appropriate out-of-play area. A Moribund card is, for all other purposes, still considered in play.

Until the end of the action window, your character is still considered in play for the purpose of its amount of power.

Yes I read that, its just not very clear in the rulebook so can lead to some confusing situations for new players.

Toqtamish said:

Until the end of the action window in which a card is removed from play, everything about it counts "on the way out" - except its ability to be removed form play a second time. That means power on a character counts "on the way out." As a result, there are some - though not many - situations where a player can win while one or more of his or her characters are "on the way out."