Ok so here is my update. Scratch the $2.99 filter pad. It catches a lot of muck (surprising how NASTY it got after just a day of being in there, but it's too flimsy. Once it gets water logged, it compacts down and slows the water flow causing the filter section to almost overflow in the tank (and consequently all over the back of the aquarium. It might still be useful for an occasional polishing of the weater to get some gunk out, but not everyday use.
So, I got some of the Aquaclear 70 pads (former AC
300). It's a big foam block that is a lot sturdier so it won't condense down. And it's designed for a higher flow filter, so it should be ok. $5-6 for a 3 pack. I cut one of the pads in half. Half is placed right before the biowheel, half a few inches in front of the one. Due to the sturdier nature of these, you don't need the craft grids anymore (although, still useful for a template), but a piece of cardboard would serve just as well at this point.
Still experimenting with the peat, so that hasn't gone in yet. But I did put one panty hose filled with carbon in to take care of a little stink from water lettuce and such. Seems to work just well.
After a day or so, water flow seems to be pretty good. and unlike the Marineland pad, the water gets put through two sets of pads now and all of the water goes through it (not flowing over the edge).
Once I decide this is the final version, I'll post a pic.