Sponge adds greatly to the overall stability/health of the aquarium (not salinity stability).
Jon, Your red sponge was a wise purchase. Often though, the big sponge starves! It will grow well if some type of invert food is added periodically.
Steve Tyree has written some excellent but often overlooked information regarding sponges and sea squirts. He was one of our guests (in 2001 I believe) and we may have his lecture on VHS and we definitely have his books in the WMAS Library.
I used an unlit "Sponge sump" with great success until last year when I let go of everything. Since returning to keeping a reef, I found that the people that got some of my sponge had tanks that were ahead of their time as far as organism growth. My brother, Rodney, (he's on the membership list so feel free to call and visit him) has a tank that looks twice it's age. It has a lot of visible and unseen sponge growth originating from the rocks I gave him. I took some frags of his sponge for my new 10 gal. reef and am certain this is partly why it's doing so well.
Sponge and sea squirt sometimes look similar but a distinctive sea squirt that many people will recognize are 1/8 -1/2 inch, clear to milky white, barrel shaped things that appear on glass and rock. Sponge can be ball shaped of any size and color or can grow thinly across the surface of glass or rock with noticable ventricles or water outlet holes on its surface.
Sponge and Sea Squirts are "benthic" organisms, most often living in dark low current areas. They are very effective filter feeders that eat bacteria and associated bits of organic matter. So they clarify the water.
For years I had an algae sump refugium in a south facing window, leading to an artificially lit reef, leading to the unlit sponge sump underneath. The water was then pumped back up to the window tank. No major additives were used but everything thrived. I tried to simulate some different zones that may occur in nature. IMO every zone did better because it was linked to the other zones. They kind of fed each other.
I also used a surge device in the reef which was fantastic! Adam Blundell developed a good design which I followed. Every guest we have had come speak to us believes that surge devices are a step forward in reef keeping. It requires some crazy devotion, almost addiction to this hobby so I don't recommend them for everyone.
I'm addicted to reefs.