Are you certain its your LED's producing this heat? It sounds fairly extreme for a LED unit to raise a whole system temperature by 7 F, as you clearly notice, this fluctuation is HUGE. In my own experience the Jager heaters are top notch. Yes they're fragile, but this pays off for accuracy in its thermal regulation. I absolutely loathe turning my heater to 85 and seeing it heat a tank to 75, big peeve! Jagers when calibrated properly have NO problems in my experience staying accurate.
Petsmart brand? You mean top fin? Well thats another heater I have experience with too. I worked at petsmart for 3 years here in canada. As you are aware they sport a very nice guarantee over fish hardware, guaranteed to work, forever! All you have to do is pack up your equipment when it fails, and have it replaced with new Top Fin gear. The problem is that you'd return your pumps and heaters more frequently than your filters need new media! What a nightmare! And I've seen this not from my own experiences but from those of hundreds upon hundreds of customers. Bottom line? Don't ever put a Top Fin heater in with anything you don't want to eat, cause you're just gonna cook it.
Having an open topped system as mentioned by N+D Frags will also allow a lot more thermal energy to dissipate from your water. If too much exits, thats when mistur Jager-monstar (I just love these suckers!!) kicks in.
In your current 29g system, your temperature could bounce around horrendously if its exposed to sunlight. This isn't the case.., right? If you have a high powered light fixture that IS producing this huge fluctuation during the day, then you will absolutely need to score yourself a good cooling fan, and/or move the light further away from your water (the fan will usually fix this right up, without having to move the lights).
Having a quick look around online you may be amazed at some of the products that are geared these days for cooling aquarium lights. Inexpensive, very effective and very small to boot. Ebay is a good place to get your bearings as to what products may be available to solve this problem.
