So you have loosely covered the reproduction species concept and the niche species concept.<quoted text>A species is a division of individuals grouped by virtue of their common capabilities to be fruitful and multiply within a given work area or ecosystem niche.
The niche one doesn't work when examined, because niches aren't real. They're created by species who favor exploiting parts of the environment over all others. Selection then favors those individuals who are better at exploiting that one part of the environment and runaway natural selection produces a specialist species. This especially happens when like species are living in the same geographic area - they specialize in order to not compete with each other (a more accurate way of saying this is that natural selection favors individuals who are specialists if there are other specialists around).
But the niche didn't exist before the species as a separatable thing from the overall environment. The species produced that by creating a resource and then monopolizing it.
So niche is really a shorthand for saying "the specific part of the environment exploited by a species."
The reproductive species concept doesn't work too well, either, b/c lots of species can interbreed and produce fertile offspring. Ruffed grouse and sprouse grouse, white tail deer and mule deer, and on and on. In the laboratory, lots of species can produce offspring that otherwise wouldn't b/c of mating practices or social behavior - hamadryas baboons and olive baboons, for example, various birds, lizards, salamanders, etc.
So a species not necessarily bounded by reproduction; gene flow can happen between closely related species. Moreover, all free living species have parasites and pathogens that sometimes inject their DNA into the species' gene pool.
How can we call a species a bounded unit if it's DNA can change through transposons and mutagens?
Well, we cannot. Species are best defined through a DNA centered framework. Species are loosely bounded gene pools that can be invaded by outside DNA, through gene flow and pathogens, and mutation.
When you understand this rather difficult concept, then the fossil record becomes clear. Species are loosely bounded gene pools traveling through time, changing over time - they are dynamic and not static, they are loosely bounded and not perfect.