[Is this diatoms?]

Hmmm, they kinda look like diatoms to me, but not sure.  Diatoms are not technically "algae" .

[Thoughts on DIY Root tabs?]

I use the Osmicote Plus tabs and they seem to work well in my 29 gallon.  No ammonia issues so far.  They can be annoying as heck to bury though.  I have had several popup and just disintegrate and leave the little pellets dropping all over.  I only got them because as you pointed out they are cheap.  I believe I have seen better plant growth since I started using them about 4 months ago, but I also use some liquid ferts, so cannot prove it.