I don't think you'd get the tiny bubbles you're looking for with foam or sponge. A powerhead would probably work better than a passive diffuser because it puts a bit of negative pressure on the CO2 line, which would make your DIY system work better. I know when I did DIY CO2, I couldn't put the diffuser too deep in the tank because the water pressure would stop the CO2 flow.
I've got a pressurized system and I use a powerhead as a diffuser. I've got a Penguin 660R that's meant to power a RUGF. I run the CO2 line into the aeration port and I have the RUGF adapter aimed toward the wall of the tank. The tank usually looks a tad cloudy because of the fine spray of CO2 bubbles.