The test kits are reading the Chloramine in your tap water. The water conditioner splits the chlorine/ammonia bond and converts the released ammonia (NH3) into relatively non-toxic ammonium(NH4). Many test kits will give false readings with NH4 but it isn't a cause for concern regarding your tap water. The AC filters are fine to use but I'd go with one of the new Rena Smartfilters. It hangs on the back of the tank. It's a little more costly than the AC but well worth it. I'd also consider switching your water conditioner over to Prime...best bang for the buck.
http://www.bigalsonline.com/BigAlsUS/ctl3684/cp19169/si2495865/cl0/renasmartfilter20
http://www.bigalsonline.com/BigAlsUS/ctl3684/cp19169/si2495865/cl0/renasmartfilter20