I have used flatworm exit at many many times greater dosage then recommended. It, by itself, doesnt appear to have any affect on anything other then flatworms. It is most likely the toxic compounds found inside the flatworms that are causing the livestock unhappiness that you are observing. It is amazing how potent it is. When you siphon them out of your aquarium, take a quick smell of the bucket and it will nearly knock you over.
What you need to do is dose your entire system with FWE, then get a natural predator to keep those that survive in check. The wrasses that were mentioned above, or green mandarins if you also have decent copopod populations.
The freshwater dip is in my opinion, a really bad idea.