OK, try doing a 20% water change and then check your levels. It should be possible to keep the levels below lethal doses by continuous water changes. You may need to do 20% water changes every day. This will mean that your cycle will also take longer.
, is there some place like a local Wal-mart where you can get a 10 gal
setup or even a 20 gal
container to put the fish in for now. You can mix the existing tank water with 80% freshly made water to get some of the bacteria in the temporary tank.
Read about setting up a QT here
Forget about running the sponge filter in the main tank for now. Just let the QT tank go through the cycle with JUST the damsels. CHECK the levels every day and be prepared to do 10-20% water changes on the QT tank daily.
Let the main tank go through the cycle with JUST the LR
and don't do any water changes till the tank has completely cycled.
On Monday you can see if the LFS
will take the damsels back. Ask yourself if you really want them in your tank. They will be hard to remove later and can be aggressive to other fish.
Start another thread with your livestock wish list and then listen to the advice you receive here. Not all of it will be good 8O , but I really respect the advice from the advisors here. Most of the regulars will also have great advice and even better suggestions.