He may have some kind of vision issues, have you tried the moonlight on his tank, maybe it is the type of light ( led ) or color spectrum, or kelvin temp. Try a 12/13 watt CF aim it from the side. Could he have been abused by a previous care taker?
A guy on youtube called Pondguru shows how to make simple, cheap bio filters, out of various plastic bottles, air pumps, and bio media. For your tank to be successful you will need to kick up it's bio filter.
Your fish and the TSS will work together at the same time... adding the TSS to the filter just gives the bio media a good boost. Since you don't have gravel, most of the surface for bb to grow is going to be in the filter.
I agree with el337 your fish is suffering from nitrite exposure, he is slowly suffocating. If you can move him to a shallow container, so he can get some air that may help. A temporary treatment of 1 TSP of AQ or kosher salt to one gallon of water has saved many fish from nitrite poisoning...
Place the sword off center, java moss on the branch would kick it up a notch, anubias and or java fern glued to the pots would help to transform from functional cave to inviting decor. Even as is, that is a very nice tank.
They are not immune, some species of cichlids need to be overstocked to avert aggression. In those type of tanks a large sump is used to increase the water volume, so a 150 gallon tank will often have almost the same amount for the sump...total water volume is doubled.
Bacterial diseases such as coulmaris / septicemia are brought on by overstocked tanks. Viral / iridovirus are common in dwarf gourami and overcrowding & the stress that it causes will weaken the fishes immune system, resulting in death. Overstocked tanks are not conducive to successful fish...