Live arm just means it is an easy velocity coming out of the hand/arm. Though that is the more traditional definition. It could be used differently now but I doubt it. It isn’t really tied to a velocity reading more of how the body looks when it is coming out. Is it easy or is it a max effort coming out.
A mid round pick regardless of if it is a pitcher or a positional player you are looking at projection. Where are they now and could they add more in the future. For a pitcher that could be velocity, control, length, movement or durability. By length we are talking about stamina. If they were exclusively a RP in college could they transition into a starter or a multi inning reliever.
I don’t believe there is a specific thing scouts are looking for but a combination of things based on projections.