Chris,
I have been dabbling with nano reefs for a few years now. I started with a 10 gallon with all diy lighting. Currently I have a 24 gallon nanocube running. I am right with you now as I am in the midst of setting up a 3 gallon.
I got a JBJ picotope and added about a 1.5" sand bed of aragalive oolitic sand and about 5 lbs of live rock from other tanks. It is currently under the stock 9w 50/50 but I am either upgrading to a 2x9 or 2x14w hood.
In answer to your questions, you will be able to grow corals easily under 20w of PC on a 2.5g. The sand bed is up to you. On the one hand, it gives you more biological media to filter the tank and possibly help remove nitrates. OTOH, bare bottom allows for any detritus to remain in the water column with enough flow. Personally, I like sand beds for the asthetics but to each his own. In order for this tank to be successful, you just have to keep in mind that with the smaller water volume topoffs become infinately more important. The salinity swing in missing a single days topoffs can be enough to kill your coral. I would recommed some form of topoff if you can. I apologize that no one else is helping you. Also, if you would like some more help PM me and I can refer you to a website that has lots and lots of 2.5 gallon tanks and advice for pico reefers.