Hey guys..sorry for the delay in response - I have been on business and wasn't able to login till now. Anyways, thanks so much for all your help. It does seem to be mainly in the rocks and on the bottom. Anything that agitates the live rock or bottom of the tank (i.e. glass magnet, fish moving quickly from a rock, siphoning) makes it look really bad till it settles..like I said, they're just white particles, so it looks like snow in the tank for a while. I tested a couple weeks ago for amonium, nitrates, nitrites, etc. and all looked well - didn't do anything with calcium (no additives added). So just for peace of mind, do you all feel that this is not a danger to the fish? Honestly, I was told regular tap water would work fine so that is what I've been using to fill and top off.
I'm hoping the foxface rabbitfish does ok in this tank for awhile..it's definitely my favorite fish of the bunch. I did notice the other day a couple small brown marks on its one side..they don't seem to be open wounds, but almost look as if it hit something or possibly was bit by another fish. The tomato clown can be pretty agressive, but for the most part they all seem to now get along. I introduced the clown to the tank first, then the rabbitfish a couple weeks later, then the damsel a few weeks later. I thought the damsel was going to be clown dinner for awhile, but it was way too quick in escaping so I guess the clown just figured it wasn't worth the effort