This continues until the end program is nothing like the original algorithm.
I am guessing the reason for shutting down this pair of agents was not because of fear of independent thinking but because the scientists were losing the ability to monitor the changes made to the algorithm due to the development of a private language between the two agents.
Doesn't make sense to create a self-developing algorithm if the algorithm refuses to let you see what it has developed.;-)
It’s still doing exactly what it is programmed to do. Thus not AI.
The program could only augment the algorithm as it is programmed to do so. Any alteration would occur within a defined set. The program could not make any changes that were not defined or allowed for it to make.