A few thoughts:
It's hard to tell from your pics how the elegance is positioned. You don't have its skeleton buried in the sand, do you? They do much better laying horizontally on the sand bed (which is how they grow in the wild). I have certainly seen them swell up, but rarely that completely - usually mine swells a bit before excreting waste.
Also, absolutely should be in the shade. Again, in their natural habitat (if I'm not mistaken), a lot of their light is blocked by mangroves & other plants (side note - also probably indicating murky/organics filled water). I keep mine under an overhang on the bottom of my 55 which is just lit by 216w of t5-ho.
Low/Intermittent flow seems to be the best - you want nutrients to be moving by the elegance for it to trap/eat, but too high a flow and it won't be able to catch anything (in addition to being irritated by the movement itself). I use a PowerSweep 214 (which somehow still works..) to provide a semi-intermittent current for my elegance and my hydnophora.
If you're not, I would definitely be target feeding at least once a week...the 4" diameter head on mine would eat a silverside every night if it could.
As for the timing of your torch having problems...my first thought, before infection of any sort would have to do with allelopathy - the chemical warfare that a lot of these corals - and the elegance is no lightweight - can wage on each other (and just release when stressed) can wreak havoc on your tank even if they're on opposite sides. Are you running any carbon/skimming?
If I were in your shoes, I would do a few big water changes, get some fresh carbon going and watch everything else in the tank carefully for signs of stress...(besides obviously double checking all your parameters)
Maybe someone more knowledgeable than me has more advice to give, but however you decide to handle it, good luck and keep us updated!