Sorry - I was thinking wild caught Apogon cardinalfish, combined with the description of "gray little bugs" by the OP - had me thinking isopod. These are not isopods.
The problem is that you cannot see gill flukes without a microscope. Whatever is on this fish's gills is causing massive trauma. IMO, a fluke infection that bad would have killed the fish long ago. Still, a prazi treatment isn't likely to do any harm.
Here is another thought - Bangaii cardinals are one of the few fish that seem sensitive to goitrogens, compounds that cause goiter. Other fish you see this in include jawfish, sharks and sometimes angelfish. The pinkish growths may actually be out-of-control thyroid tissue. I've seen this grow out of the gills of Bangaiis before - but never out both gills like that. How long has the fish been in captivity?
Jay