The sort of nurseries you are considering are known as in-tank nurseries and they can indeed be very successful for rearing seahorse fry, as discussed below:
The In-Tank Nursery.
In-tank nurseries enjoy all the advantages of divided nurseries and then some. For example, like divided nurseries, the tank-within-a-tank design makes it much easier to provide seahorse fry with stable conditions and optimum water quality, vastly increases filtration and equipment options, simplifies maintenance and offers enormous versatility. The idea behind the in-tank nursery is to confine the seahorse fry in a small, flow-through enclosure that can then be attached securely inside a larger aquarium. The in-tank fry enclosure must allow water to pass through it freely but not fry food such as copepods, rotifers or Artemia nauplii. The enclosure thus allows the food to be concentrated in a small space to maintain the proper feeding density, while at the same time providing the fry with all the benefits of living in a much larger volume of water. This includes greater stability in terms of water temp, pH, oxygen levels, salinity and so on.
But by far the biggest advantage of the in-tank nursery is the superior water quality it provides. The larger tanks that accommodate the fry enclosures are normally in the 10-20 gallon range, but there is no upper limit to the size of the host aquarium — the bigger, the better. Of course, for starters, the larger volume of water is naturally more resistant to pollution from the mass consumption and elimination one must deal with when rearing seahorse fry. But more importantly, with the fry safely sheltered in their nursery, the main tank can be equipped with any kind of filtration and filter media you can think of to improve water quality or safeguard the health of the fry. This includes heaters, sponge filters, inside box filters or external power filters with activated carbon, polyfilter pads, or ion-exchange resins, micron-level mechanical filtration, bio-wheels, wet/dry filtration, protein skimmers, UV sterilizers, ozonizers — you name it. Airstones, bubble wands, powerheads, filters and the like can operated full blast without worrying that they’ll buffet the fragile fry or that they filters may ‘eat’ the newborns or consume all their food. Use your imagination — anything goes!
Water quality benefits as a result, and the added filtration reduces the need for frequent water changes. When substantial water changes are called for, the main tank makes the whole process easier.
The first in-tank nurseries were ready-made breeder nets intended for livebearing freshwater tropicals (Abbott, 2003). These breeder nets worked very well for dwarf seahorses, which produce small numbers of babies (Abbott, 2003), but they are not well suited for the huge broods of fry many of the greater seahorses produce. Hobbyists soon began to improvise in order to overcome the limitations of such breeder nets and accommodate larger broods in their fry enclosures. Breeders began to experiment with in-tank refugia, "critter keepers," and various plastic containers to meet their needs. They modified these by drilling them full of holes and covering the holes with plastic mesh. If necessary, an airline is added to the fry enclosure for better circulation and a drip line brings filtered water in from the main tank or an external power filter.
The versatility of in-tank nurseries is one of their biggest assets. They allow almost any existing aquarium to "host" a fry enclosure and there is also great flexibility in the design of the inner nursery tank. They can easily be modified to accommodate either benthic or pelagic seahorse fry, and multiple in-tank nurseries can be housed in one big main aquarium. Endless variations on this basic concept are possible. The in-tank nursery is simply a much more versatile and adaptable design than the divided nurseries that preceded it.
Okay, that’s the quick rundown on palpins or in-tank nurseries, ageber. For good results, you need to be very meticulous about keeping such nurseries scrupulously clean, since fecal pellets build up in them very quickly. When seahorse fry are well fed, defecation is amazingly rapid, with each newborn producing an average of one fecal pellet every 25-30 minutes. Multiply that by several dozen newborns, and you’ll have a pretty good idea of the magnitude of the sanitation problem. Hundreds of fecal pellets are going to accumulate on the bottom of the in-in-tank nursery every hour.
The best way to deal with that situation is to siphon the fecal pellets of of the bottom of the in-tank nursery several times a day, and to maintain two or more of the palpins or in-tank refugia and switch them out regularly. While one of the in-tank nurseries is occupied, keep another identical one in reserve, clean and sterilized. Then gently transfer all of the newborns into the clean in-tank nursery, taking care not to expose them to the air. This will allow you to clean out the dirty in-tank nursery thoroughly and sterilize it again, so it’s ready to go back into operation. The more often you switch from the dirty in-take nursery to the clean one, the better. Changing them daily is not excessive.
Not only is changing the in-tank nurseries regularly a good idea for sanitary purposes, it is also an excellent way to prevent hydroids from getting established in the nursery, which is indeed more likely if the host tank includes lots of live rock, live sand and corals. The hydroids will have very little chance to colonize the in-tank nursery if you replace it with a clean one that you have sterilized every couple of days.
Best of luck rearing your Sunburst fry, ageber! Please keep us posted on how well your in-tank refugia work as nurseries.