I'd like a clarification. Does the inherent AA present with observation Balloons and artillery units project into adjacent hexes like Archie units do? Also do they need to be activated? I'd guess not since there seems to be no means of indicating that status. Do they then ever target friendly air units or is that only activated archie counters?
Yes it projects into adjacent hexes and should be treated like normal AA except that it does not have an active/inactive capability so would be considered Active at all times. The [16.33] Deconfliction rules from the Living Rules Update would apply to friendly flights overflying the AA at Medium and above.