I've read quite a few theories on House-Elves, but I wonder peoples opinon on them are. Do they die after a few years of freedom? Do they lose their magic as they get older? Are they born of the houses they serve?

Personally, I like Intromit's explanation best. House-Elves are born of the magic from old buildings (explains why Hogwarts and old pureblood manors have elves) and they draw their magic from the house. When freed, they will die if they do not find a magical dwelling to reattach themselves to.