or just dont cycle.... i never did and everything in my tank was fine. however i used 25% water from established tank, 75% natural sea water, live sand, live rock. if you look in my thread you can see my tank about a week or so after i set it up and i didnt lose a thing. that is just one experience though, so use whatever method you think works best... different strokes for different folks...
as for the jaw fish, def have a deeper sand bed, like mentioned above, have a few inches in there. avoid any corals on the sand bed which are near where the jaw is living. they do much better in groups, although this is probably not an option for you in a nano.