the paper strips are pretty inaccurate actually, i'd recommend going with the API freshwater master test kit, it's liquid. it's a bit more expensive but will last a whole lot longer and is much more accurate than the strips, so you'll be able to get a much better reading.
even so, with those readings for ammo and nitrIte then it's definitely a mini-cycle, i'd go ahead with daily water changes to keep the levels safe for the rest of your fish
can you get a picture of the danio with the "hairy" appearance? does it look like cotton? what color is it?
i'm sorry you lost your danio
