Nikki I don't think anything went wrong with the mud. NY mud just has too many organics in it. I think I did this when they came out with Miracle Mud which is a totally different thing. I am not even sure what I was looking for with the mud except that it would put some chemicals in my reef that were not there in the quantities that the natural sea water alone was supplying.
I have very good results with NY seawater and I figured mud would add something. It did, algae.
My tank is very old and I don't keep it just to see how pretty I can keep it or how long I can keep something alive. My tank is and always has been an experiment. Some of my experiments killed many of my fish, some killed corals but many times I did something that worked in a way that I did not expect. I many times use Clorox bleach to purify NSW if it looks questionable or I think it may have red tide in it. (I did not invent this) But once I made the mistake of using Clorox that was not "regular Clorox" and within seconds most of my fish died. The corals lived but looked horible. Some fish recovered and all the corals did but after that episode maybe 20 years ago (and it has been determined that I have a lousy conception of time) the fish have never been sick with anything. No paracites, bacteria, fungus, unexplained death, nothing. I do not quarintine (but you should) and I many times put fish in my reef with obvious ich. Could it be the chemical in Clorox? I doubt it, but maybe it was. If I put in a fish with ich the ich will disappear on it's own or the fish will die but it will never be transfered to another fish. I have not been able to figure out why. I think it would be a huge benefit to this hobby if I knew the answer.
I also add local New York seaweed (codium) looks great, works in a refugium and it's free. I use New York asphalt for some of my live rock. I collect it underwater where it was dumped in fifty years ago to control erosion. Coraline algae grows much faster on it than "real rock", it is very porous and jamed full of amphipods. Of course it too is free.
I once put doxens of barnacles in to filter the water, not a good idea, they don't live long. Anyway I don't know if I answered your question about the mud but I would put chopped bowling balls in there if I thought it would benefit something.
Have a great day.
Paul