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Isn't there a problem with "distilled" water?
Otherwise what mr_X said is probably likely. You need to test your parameters.
PH, ALK, and Calcium minimum to start and then Magnesium next. If you are dosing two parts then they should be in line with one another...though perhaps all out of wack.
My only suggestion is read as much as possible before you spend money on new lights. Until you get a good idea of what is what, try to read different threads on CP lighting, T5, MH or even LED. There are some nano reef forums too like Nano-reef.com. Check them out see what reviews you hear on...
As much as I worry about you getting the right lights, I would say don't worry about the K3.
Keep it up top and your sand will be fine. The surface movement it great for the gas exchange.
I found that I would have mine set up opposite the intake for the back tank and created good surface...
Something like a TLF (Two Little Fishes) reactor or similar yes. Would help, skimmer check. Well for calcium your choices are two part solutions, kalk reactor, or calcium reactor. I personally just dose two parts and do water changes. I use ESV for what it is worth.
The old saying take it slow applies here. Check out the for sale section here and manhattan reefers I bet you can find a good 4 or 6 bulb fixture fairly cheap. Don't throw good money out the window on a fixture that in 2 months you are either going to want to upgrade or are generally unhappy...
I have found that greater flow will help some macros like cheato that actually likes to tumble.
Warning or footnote, the greater the flow the louder it will be.
I don't know diddly about HOB overflows so cannot help at all with that part.
With that much CP lighting you can keep just about anything. That being said I don't like CP lights because you a) have to replace the bulbs way to often 6-9 months b) they generate too much heat being older technology c) they don't have the par of T5 or VHO.
Now besides lighting you need a...
If you can have a pair of fish, one positive for clowns, then you add one more + for tank interaction. There are a number of fish that can pair up and mate. I would consider that in the stocking.
All of what gogol said.
Would include that salt water is a lot less forgiving then fresh. I have both tanks and I do very little percentage wise on fresh water maintance...and that is with drift wood, plants, etc. It is great and my festivum is maybe my favorite fish in all the tanks; but...
Well honestly I don't think it is enough. I have a similar fixture on my 55G fresh water tank, it is just barely enough. You are right about the new bulb length. I think you want roughly 3.5+W per gallon...and believe me I am a HUGE supporter of T5 lighting it is what I have. You will...
If you keep the K3 just keep it towards the top you can get a good circular motion.
The how many T5 bulbs on the fixture 2 or 4. I believe the 30in fixture uses 24in bulbs ... if it is only two you are going to be under powered unfortunately in a 29 gallon tank.
A 4 bulb or 6 bulb fixture(not...