Which sponge are you referring to? IN the skimmer, or in an external bubble trap? If it is the one in the skimmer, ditch it. It will only cause problems, and does not work very efficiently.
Have you cleaned the rio at all? Particularly the air intake lines? These get clogged with salt creep and greatly impede air flow which can cause problems getting it set up properly because the amount of air flow is constantly being reduced. Start off by cleaning the powerhead really well, and remove the sponge. Then, you have to really play around with the little green valve. Mine is only in the line enough to the point that it wont fall out. It is not twisted down what so ever. It took me a long time to get it adjusted, but now it is a great skimmer IME. One way that I adjusted mine was to watch it from the back so that i could see the water flow through the chambers. I keep mine adjusted so that the far left (when you are facing the back of the unit) chamber is completely full, but the other two are basically bubble free. One thing to keep in mind is that while a good amount of bubbles is necessary, the slower the water flow, the greater the contact time, and hence the better the skimmer performs.
Let me know if you have any more questions.
HTH
Justin