First, congrats on your new betta. Is this the first fish you have ever owned? If so, you've begun what will hopefully be a lifelong hobby.
Now, as for your betta and his home, I think you hit the nail on the head when you said "it's not the best setup." In order to be able to enjoy your betta to the full, and witness the complete spectrum of all the many, very interesting behaviors that bettas can have...you are going to need to move him to a new home.
A betta in 85 oz of water (barely over a quart) is going to suffer from ammonia poisoning very rapidly. That would be my first guess as to your problem. I would suggest doing an immediate 50% water change with the treated water you have ready. After that, you will probably need to do a 33% to 50% water change every day.
Now, in order for your betta to truly be happy, you will need to get him a home that can provide...
1. More space. Personally, I think a 2.5 gal aquarium is the absolute smallest you could possibly go with a betta, and more ideally something in the 5 or 10 gal size would be better. No fish is going to exhibit natural behavior in a tank that is barely 2 or 3 times its own body length. This isn't all that expensive either; you can find 10 gallon tanks for under $20, sometimes even much cheaper.
2. Heat. Bettas are tropical fish, and should be kept at a temperature of 78-82 degrees. Furthermore, they can be quite sensitive to temperature fluctuations. Thus you want to be able to have a heater in your tank that can maintain a constant tank temperature all day & all night. This also means avoiding placing the tank somewhere it will get direct sunlight, or placing it too close to a heater or air conditioning vent. It also means when you do water changes, you need to be sure the new water you are adding is the same temperature as the water in the tank, so you don't give the betta temperature shock.
3. Clean Water. In a 2.5 gal tank or smaller, essentially the only way to do this is to do regular, frequent partial water changes (PWC's). In a larger tank, the best way to do this is to have a filter of some sort on the tank and then cycle the tank fully, so that the bacteria in the filter are able to process the toxic ammonia the fish excretes into a much less toxic product (nitrate). Even with a filter you still need to do some PWC's, but you can do them much less frequently (once a week, or perhaps even every other week) and they can be much smaller (~20% or so).
If possible, it would be wise for you to pick up a liquid reagent water test kit (don't buy the strips, as they can be horribly innacurate), which will help you monitor levels of ammonia, nitrite, and nitrate.
If you have more questions, please feel free to ask them. You might also read through some of the introductory articles on this website and other similar websites.
Welcome to AA! We're glad to have you.
