#1: Try with a different test kit. Test kits "go bad" and give false readings.
#2: It is OK to rinse the bioballs in salt water with dechlorinator, of course. But if they don't look like they've got a bunch of waste in it, it is not the issue.
#3: I can't really imagine why your LR would die. I don't think this is really possible...and with a wet dry it wouldn't really matter...but it wouldn't die.
#4: What recent changes have you done - new livestock, different feeding??
Any sign of behavioral changes in the fish? What is your normal water change schedule. Do you use tap water or RO.
My first thought though - especially if you don't see an increase in nitrites - is that the test kit is bad. Have you been testing your water all along and everything has been fine? Do you use some of the products mentioned (eg Amquel, ammo-lock?) some will give false reactions with certain test kits and will result in high - but somewhat "false"- ammonia readings that may not go down.
You have a lot of fish in there, all considering, at least with adding the naso. But, IMO, that is not the issue at this time.