I have a marine tank sitting in front of me here on my desk.
First mix up your saltwater, add it to the tank, with heater and get it up to aproximately 80f, once it's been about 24 to 48 hours and the water has been mixing in the tank with the aid of your powerhead, then check the salinity with your hydrometer, if it's in range, then go to the store and get both livesand and liverock.
Dump the livesand in with a scoop to minimize the amount that will create the sandstorm, then add the liverock, by adding the liverock it will help to settle down the livesand storm.
You dont "have" to have livesand if you dont want it, I've had barebottom tanks in the past that have done fine, but the livesand is also a biological filter as well as the liverock.
I've seen some tanks that have just livesand, liverock and a skimmer for filtration and they look great.
I've seen some other tanks that have all of that as well as wet/dry filter underneath that also look great.
I originally set my tank up as a barebottom tank, but found I really dont like the barebottom look anymore and wanted the extra natural filtration of the 2" livesand bed.
As for cycling, yes you can use damsels if you really wanted to. But I've found it easier to buy a jumbo raw shrimp in my grocery store, stick it in a womens nylon stocking, then let it sit in the tank for anywhere from 1 to 4 days to get the amonia up. Then remove it and let the process do it's thing.
Besides the cruelty aspect to the damsels during a cycle, they are not very interesting fish to look at, they are very agressive, and they are complete buggers to try to catch later if you want to remove them.
Damsels are generally very teritorial and sometimes even claim the whole tank as their territory, so if you want to put other fish in with them, they are going to have to be agressive as well, and like I said, if you want to catch them to take them back to the LFS, they are not easy to do without tearing down your liverock. (been there, done that).
By the way, if you buy uncured liverock there will be enough die off on it to get your cycle going for you, but if you buy cured liverock, there will be little die off and the cycle will take longer if you dont use amonia, a shrimp or fish to the tank for the cycle.
