Thanks for the help!
Alright guys, first of all thank you for the great recommendations. I appreciate each reply to this question. I would like to clear up a few of the points I may have been a little vague on and also I would like to make sure that I have the right idea based upon all of what you guys said so I am going to 'diagram', text-wise of course, what I believe to be the correct way of setting up this refugium based on your responses.
First, I want this refugium to be several things. I would like it to act as sort of a large biological filter. I was planning on dumping quite a bit of live sand into the bottom of it, maybe tossing a few small live rocks and (I found this idea on another website at some point) going to the most local place that sells live rock (which is like an hour drive) and trying to get a bunch of that sludge an gravel that lay at the bottom of a live rock tank pretty cheap just to sort of seed it. That stuff usually has tons of copepods, bristle worms, and other critters. I wanted it to be a place where I could add the chemicals so they had time to mix around and dilute before getting to the fish and my corals. You don't have a lot of water for dilution with a 29 gallon tank, especially since I already have a lot of live rock in it. And of course grow some macroalgae of some ilk, I was assuming caulpera was the best to use but after reeding some of your posts I may want to look further. Probably most importantly, it would help me maintain the water level in my tank. I have pretty hefty evaporation and with only 29 gallon tank it shows quickly. I think it would be easier to maintain the level with a refugium.
Because of the layout of my tank and where it is, there is an impossibility of placing the refugium above it, however I can place it beside the main tank but at a much higher height...say making sure that water level of the refugium would be an inch or so higher than the main tank? I would then drill an overflow hole into the refugium, about water level height, and plumb it so it dumps back into the main tank using PVC pipe. I would place a powerhead or water pump into the main tank and have it pump water from the main tank up into the refugium. By doing this, I would raise the water level of the refugium causing it to dump directly back into the main tank. In the case of a power outage, the pump stops pumping and the water in the refugium only drains down to below the overflow I had drilled. If the water levels in the two tanks were fine to begin with, and this were to happen, then I shouldn't have to worry about a big mess right? If I understood correctly, this eliminates the need for an overflow box? Also, what would be the best way to make sure that my overflow didn't get clogged up somehow causing the powerhead to overflow my refugium? Thanks again guys!