I went the powerhead route for my 29 gallon as well, using an AquaClear 30 with the quick filter attachment. I just popped the bottom out of the quick filter cage and put my DIY yeast CO2 tube up in there like Hoppy.
However, I think I will purchase a canister filter. The original filter material that came with the quick filter was clogged in a matter of days, and even now when I use coarse filter floss it needs to be removed and repacked every week to two weeks or flow really suffers and the tank becomes dirty. That and even in a 29 gallon, the powerhead and filter take up too much space and are too ugly. I will admit, it does make a perfect CO2 diffusor!
Hoppy, do you have to rinse out your sponge to keep flow rates normal?