For both Primary Risk Factor Matching (Method 2) and the Small Factor Risk Mismatches (Method 3) - Duration is always matched. The active manager has permission to change other factors around to a little extent in the Method 3 (Small factor mismatches). Hence his tracking error will be higher with this method.
Term Structure would be a risk Factor. not sure how it becomes a risk measure… How are you going to measure it? It is a risk factor because it can be seen (should say expected/unexpected changes in term structure cause yield / spot rates change and causes the twists of yield curve).