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.
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"It's not what you buy, it's what you build" -Unknown
29G, Eheim 2232 X2, DIY CO2
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