Hey Dan.
There's a couple of things I'd do differently with your tank.
First and foremost: The tank is only a week old, so be prepared to wait at least another month (two or more is recommended) before you start adding any other livestock. As you know already, patience is key with marine aquariums. The tank probaly hasn't even begun the cycle yet, so don't assume that because the test kits read 0/0/0 that is is ready. It's always safer to wait longer when it comes to reefkeeping. Sorry if I'm repeating a philosphy you already believe, but it's important enough to make sure it's understood
BTW, the strange part is you're getting noticable nitrate levels only after a week, with no nitrite or ammonia readings. Was I wrong when I assumed the tank was only a week old?
I recommend you remove the damsels right now (return them for store credit). Once the tank is fully established, it'll be nearly impossible to get them out without wrecking teh whole tank. There is also no need to stress these fish for the sake of cylcing as the tank will naturally cycle with live rock in there. Cycling with damsels is an outdated method that people these days don't like (some detest the practice).
Which leads me to my next suggestion of adding ALL the live rock you ever plan on keepin into the tank right now. It is not a good idea to add live rock once the tank is established with livestock since the new rock may cause an undesirable nutrient spike upon introduction (think of it as a mini, acute cycle)
A S.G. of 1.025 is what I recommend. I'm sure you read that 1.023 is ideal (it appears to me that is what you're aiming for), but natural seawater is really 1.025 and the 1.023 is based on older information.
I don't know what white marine sand is, but I recommend you use 3-4" deep of aragonite based sand. Caribbsea makes really good sand in a range of particulate sizes. I recommend a mixture of sugat-sized sand and Special Grade sand from them. A healthy sandbed can be important to the health of the overall system.
I'd get rid of the sponge filters and biowheels. They aren't necessary in marine aquariums; the live rock and sand will serve as more natural, better biological filters then any sponge or biowheel can.
A few other equipment I recommend:
You should consider a protein skimmer. Protein skimmers are great at removing nutrients and saturating the water with oxygen. I'd get rid of the air stone I see you're currently using as you'll end up with A LOT of salt creep at the top of the tank.
A RO/DI unit if you don't have one. It's important to control what goes into the tank, and having clean water is the first and most important consideration. A RO/DI will ensure this and is worth every dollar.
Better lighting. You've got a choice between Power Compacts, T-5's, VHOs, or Metal halides. If you aren't planning on making this a reef tank, you could stick with what you currently have. But if you want to make this tank a reef tank, your current lighting is not sufficient.
Hope this helps. Let us know if you have any further questions.
