As was said above, biological filtration (the biowheel and apparently the batting that you use in your filter trays) is not needed in reef tanks, that's what the live rock is for. The reason they told you not to change all the filter material at once is for biological filtration... when you change it, you lose the bacteria that populate it. This works for fish only tanks, or tanks with little live rock... it is not needed (and probably the source of your nitrates) in a tank with lots of live rock.
Skimmer tend to work best when they are run constantly. Something about the interaction of the proteins and the 'skin' that forms on the inside surfaces of the skimmer body makes them more efficient when they've been running for a couple days to a week straight, or so I've been told.
It's obvious that you don't have a lot of flow in the display (you are keeping seahorses after all), have you considered adding some live rock to your sump? Larger chunks will have deeper areas that are anaerobic, which provides a place for the nitrate consuming bacteria to live.... while you're at it, you could run some Chaetomorpha algae in there with light, that will also help with the nitrates. Or grow some other macro on the rock.
Some fish do poorly in nitrate laden water... something to keep in mind if your fishes look a little off.
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Calvin
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Planning a 29 gallon mixed reef...
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