Well, that ammonia still has to turn into nitrites and then nitirites if it isnt at 0 there is still at least some that will have to go through the whole cycle. ammonia is the very fisrt thing. So once that little ammonia you have there is gone to 0 then its going to be nitirites and then nitrates. When i cycled my tank I was getting high nitrate numbers even before the ammonia was all gone, sounds like the same is going on with you.
Yes, if you would have bought your fish first they would most likley not have made it this far. They need stability just like in the ocean. The ocean has been fairly constant in its makeup for a long long time. Fish need that. it would be like taking you from outside and puting you in a small garage with a car running. You probably won't last too long.
Damsles are pretty hardy fish, this may be the way to go since its a small tank its going to be harder to keep the parameters perfect so a hardy fish will give you a little bit of room to work.