You guy's certainly know more about soil than I do, but I can offer that I've used similar setups and had great success. I used a foam backdrop in a 10G once (the backdrop was designed for reptiles). It had all sorts of little cutouts / nooks / crannies etc-- nice to grow moss & plants.
I just hollowed out a section in the bottom, added a waterfall pump and ran a return line at the top. Once established, it ran great since the filter area was huge for the tank size. Never had ammonia etc. problems.
"It's not what you buy, it's what you build" -Unknown
29G, Eheim 2232 X2, DIY CO2