Since the system already has a deep sand bed, breaking up the live rock to make rubble shouldn't have much effect on nitrates. There might be a short-term spike, as organic matter that was trapped in the anaerobic zone is exposed to oxygen. After that, it should be fine.
Yes, it's possible that the current flow might be too high for Chaetomorpha. It does like to tumble, but I'm sure there's an upper limit to its speed tolerance.
Some people actually try to encourage hair algae to grow in the refugium, so it outcompetes itself in other areas of the tank. Try a search for "turf algae scrubber". If Chaetomorpha won't grow in your fuge, and you're not interested in Caulerpa, then a turf scrubber might be a good option.
Yes, it's possible that the current flow might be too high for Chaetomorpha. It does like to tumble, but I'm sure there's an upper limit to its speed tolerance.
Some people actually try to encourage hair algae to grow in the refugium, so it outcompetes itself in other areas of the tank. Try a search for "turf algae scrubber". If Chaetomorpha won't grow in your fuge, and you're not interested in Caulerpa, then a turf scrubber might be a good option.