anytime I get shown a pic of a reef with no rocks in it, I know something atypical is up. even if there was no ammonia debate here, like there always will be when API is the kit, inputting damsels is a huge uronema risk which permanently ruins the setup if it gets in. that's not even considering ich/crypto and a host of other contams instantly put into this new tank already
disease is the risk
we haven't even discussed acclimation, which isn't likely by the book here at all, because that's what old cycling science does: refuses anything as a causative but ammonia. plopping sick damsels into a tank also can be dangerous to damsels if the salinity rise is a large degree. I'd expect a lfs housing damsels to practically sell them in freshwater to avoid the hassles at the store of the diseases manifesting.
there are too many variables to pinpoint here.
time to put the rocks into the tank, change out all the water, never run those kits again, stock with corals and CUC but not fish. you'd stock with fish after several days reading in the disease forum, covering acclimation and fallow and quarantine.