Correct me if I am wrong, but I believe that red algae is an aerobic algae, meaning that it does just the opposite of normal plants in respect to respiration. I do know that it seems to go away if you maintain co2 levels at around 30ppm. I believe that at this level plants will start to really outcompete it for nutrients. It also might "suffocate" it. Higher than 30 ppm though and your fish will start to have problems. And be sure to keep an eye on your pH.
For me, what I would do differently is to get a bigger aquarium. But then I would just want the next size up. Maybe I should have been born with gills!