Hi Amy!
I'm very hesitant to add any comments to this thread as in the past I've found many on this website don't agree with my dwarf recommendations. Then again, I kept dwarfs for many years, my oldest pairs being 3 years old, the youngest just about a year old when I had a stuck heater wipe out my tank and took everything with it
With that said, my only observation is those that did things very different from me..... well.... don't have dwarfs any more.
For first time dwarf keepers, IMO it is best to start out with a basically sterile environment. Dry base rock, dry sand, no live macro's or anything. Cycle the tank naturally by starting an ammonia spike by using either the "ammonia method" (ie: adding pure ammonia) or by adding some flake food or other processed food to start decaying/start and ammonia spike. I do NOT agree with the "toss a fresh shrimp from the deli" in the tank technique. Why would you want some rotting flesh along with all the nasty bacteria decomposition of tissue causes in your tank. Uh-uh, not me.
Since your tank is already up and running and the dwarfs are in it, I can only tell you my concerns. First of all, bristle worms are not suitable in a dwarf tank. While they rarely cause problems in a tank with the larger species of seahorses (note how I said RARELY, and not never) IMO dwarfs are just too small to deal with any potential 'sting' from a bristle. Not to mention the issues that would arrise should a tiny baby bristle worm be mistaken for food.
Amphipods are another "not wise" thing to have in a dwarf tank. I lost many, many baby dwarfs to amphipods. Copepods, yes...amphipods, no. Unfortunately, taking items from your reef to set up this tank undoubtedly introduced bristle worms, amphipods, copepods, etc etc etc. Again, not a real suitable home for them.
I have never used panacur myself in my dwarf tank. I never had the need. I never had a hydroid issue or unwanted critters in the tank. The only CUC I had were nassarius snails and spaghetti worms. No shrimp. No crabs. Not in a dwarf tank.
As far as feeding, I fed mine heavily in the morning and less heavy in the evening. The 10 gal tank had a glass top with a regular flourescent striplight. I would take the striplight off at feeding and lay it on it's side either in the front of the tank or on the side of the tank. This caused all the brine shrimp to stay down at the bottom where the dwarfs could feast away.
Again, since your tank is already together... I would just continue what you are doing and remove as many bristle worms as possible manually. You don't want to "nuke" the tank at this point using panacur or something because depending on the amount of worms and other things in the tank you could end up with one heck of an ammonia spike when things start dying off.
Not to jinx you, but I have yet to see a dwarf tank started with live rock, live macro's, ect that did not develop a hydroid issue within a few weeks of 2 or 3 times daily feeding of baby brine shrimp being started. So, keep an eye on the sides of the tank for teeny tiny jelly-fish looking like things or white specks with a few thread-like arms sticking out. Those are hydroids - deadly to dwarf seahorses and their fry.
When it came to feeding, I have 4 hatchers going at all times. Two hatchers have newly hatched bbs in them, the other two have day old bbs in them being enriched. Always have at least one extra hatcher going because sooner or later a batch won't hatch and you'll be scrambling to find some bbs so you can feed your dwarfs.
In it's prime, my 10 gal housed 50+ dwarfs and their fry. When I lost the tank, there were still 15or 20 year-olds in it that I raised. Quite heartbreaking for me to see the work of 4 - 5 years be gone so quickly, because of a heater.
It's been just about a year, I have yet to re-stocked the tank. Just can't bring myself to do it. I spend my free time on my Erectus pairs and their young. Not sure if I will re-start the dwarf tank again.... or not. I'd rather use the space for setting up pairs of H. capensis again, but they aren't available. So... it may be dwarfs again in the near future.
Best of luck...and keep posting updates. Dwarf seahorses will always have a little part of me - they are just such amazing 'lil things!
Tom