Wow, how did I miss this thread??? Great reading in here, and Suzy, love your comments!
I am by no means an expert on seahorses, but after a good amount of time keeping mine, and a lot of web and library-related research, I feel comfortable enough to comment a little on your situation. I'm actually working on an article I'm going to submit to FAMA in a couple months regarding the basics of seahorse setup, and one of the things I wanted to mention in the article pertains directly to this situation...at least, I think!
I've seen all the comments on O2 levels, CO2 levels, Gas exchange, and relative current in this thread. What I didn't see mentioned is that fact that seahorses, given their more primitive nature, actually need a higher O2 saturation than most bony fishes we see in the trade! Seahorse gills are not organized into booklike structures the same way most fish's gills are -- rather, they look like "tufts" extending from an arch structure. Because of this, their ability for efficient gas exchange is reduced by a fair amount. In short, an environment that would be livable for, say, a clownfish or a tang may not have enough dissolved O2 for a seahorse!
Another thing I've noticed through personal observation is the seahorse's lower threshold for nitrates in the tank. In a standard FOWLR or FO tank, many people won't bat an eye to 'trate levels of 40, 60, or 80. On the other hand, 'trate levels seem to cause my seahorse pets a considerable amount of stress. I keep my tank as close to 0 as I can, although it usually stays around 10-20. Remember, seahorses poo a lot more than your standard fish, in part to their primitive gut (no stomach!) so there's a lot more waste to go through the nitrogen cycle.
A simple an elegant solution to both the O2 issues and the Nitrate problems can be found in -- you probably guessed it -- a protein skimmer. I saw you mentioned that you introduced an airstone to your setup. Why not get an el cheapo protein skimmer? I have a 37 gallon tall aquarium, and when I was originally researching this, I did an experiment by buying a protein skimmer designed originally to be used in a biocube tank. It had suction cups to use it in non-biocube aquaria, so I set it up with minimal modifications in my tank. This is an airstone-driven skimmer using one of the wooden stones you see, and I gotta say, it worked like a charm! The airstone naturally increased O2 levels, and the skimmate helped bring the 'trate levels down from a norm of 40 to, as I stated above, 10-20 on average. I think the biocube skimmer, which usually only costs around 35 dollars, would be easy to incorporate into your 29 gallon tank. If you're not on such a tight budget you can also look into something like a HOB skimmer/refugium. These can be used with your macroalgae on a reverse-timed light to prevent those pH and CO2 swings you were mentioning. I noticed there was a website (one we all probably know and love to complain about) who is selling a knockoff version of the Aquafuge that looks like it might be promising, and nowhere near the price of the original.
In any case, I hope you continue with your seahorse adventures! I love my two yellow reidis and spend hours sometimes watching the buggers. Happy fishin!