It sounds like your cycle hasnt finished and the bacteria colony isn't large enough to cope with the bio-load produced by your fish. Im no expert but I dont think just soaking the sponges in an existing tank for two weeks would really do a whole lot. Did you just add the lace rock and put the sponges in the new filter and add fish? The bacteria needs time to grow and a source of food such as liquid ammonia for fishless cycling or you could use some hardy fish instead, Cichlids are not good fish to use during cycling.
What filter are you using? In the picture it looks like a whisper 60? If it is I would think about getting a better filter, I have two 55 gallon tanks that both came with the whisper and I found them to be terrible filters. A good low priced alternative is the Aqua Clear 70 or 110, I am currently using both and have been really pleased with them, They use a three stage filter including Foam,Carbon and BioMax.