Couldnt agree with you more happygeorge, have been keeping mbuna and haps for 10 years and 20ppm is fine.
The water need not be the same as lake malawi as none of the fish that we buy have ever seen it. They have been bread and raised in tanks that do not have zero nitrate.
yeah i agree should be fine.
If you work on one inch of fish per gallon that gives you 55 inchs of fish and by my reckoning you should still be well under that.
Your method of using the fry tank to separate the male and some females is probably the best way to only get a couple of females pregnant, this also means that you would be able to control which male was breeding and select your healthiest. i can't really answer the size of fry to be seperating...