"The early embryo is a hotbed of activity for endogenous retroviruses, recent studies have shown. To understand why embryonic cells make viral proteins, scientists have run experiments to see what happens when viral genes are silenced.

These experiments suggest that viral proteins help the embryo develop a variety of tissues. "

From the op article.

I'm am not an expert in this at all, these are just my thoughts on the matter, take them or leave them.

Regarding regulatory networks binding together elements so as to orchestrate changes in morphology - I had not thought about this, of course you are correct. Where you say that the viruses are too simple to drive sufficiently complex changes to the regulatory networks, I would counter by saying that chance mutations are sufficient to drive these changes.