QUICK UPDATE
Just wanted to give you all a quick update. I checked with the water department and there weren't any issues with water quality they were aware of. So I'm still not sure what the problem was.
Yesterday I removed about half the sand (down to about 1 1/2 to 2 inches) and gave it a thorough stirring and cleaning. I put the algea eater back in this afternoon and he seems to be doing good. I also put in a dozen malaysian trumpet snails today. I wanted to get some pics but they buried themselves in the sand so quickly, there wasn't much left to photograph. Here's what I did manage to get before they completely disappeared:
I tested the water after doing a 50% change yesterday. 0 ammonia, 0 nitrites, 15 nitrates. pH is around 7.8. Everything seems good and stable.
So my plan is to get 5 or 6 yellow labs tomorrow at a lfs. If everything goes well, I'm going to then order 12 or 13 demasoni from livefishdirect.com.
Any thoughts or concerns about my plans? Feedback is greatly appreciated!!