It could work, would be best if you had something to push the bubbles through the sponge. such as running a tube part way into the sponge and letting the co2 pressure force the bubbles through it.. This should be an excellent way to diffuse the co2. My reactor is set up much in the same way. Its a cylindrical tube that has a line in for co2, has a power head pushing water through it, has a spinge in the bottom of it, the power head pushes water into the tube as teh co2 pumps into it, in turn pushing the water and co2 through the sponge.
Good luck