Clayswim I got to disagree with ya brother
Rock doesn't soak up nitrates, and it won't hold nitrates either; those are both urban-reef legends.
Sure it will, it has to or it wont denitrify and thus wont hold that strain of bacteria
Live rock will decrease nitrates because bacteria living inside the rock break the nitrate molecule apart; which turns it into a harmless gas that escapes into the air.
Very rarely happens this way, to many variables and conditions that stop that process.
As ammonia and nitrites enter the rock they're consumed by nitrifying bacteria, which will ultimately turn them into nitrates
Ammonia and Nitrites never directly enter the rock, detritus and particulate matter lands on the rock form here nitrifing bacteria removes certain ions to be reduced and passes down biproducts, nitrate being but one of them.
The bacteria break apart the molecule in order to steal its oxygen and continue working. It's for this reason that an anaerobic (without oxygen) environment is required for bacteria to remove nitrates
Nitrate reducing bacteria are fuculative so they can either fix oxygen or directly fix nitrates, so direct fixing of nitrates becomes its method for respiration.
LR has an advantage over other forms of bacterial filtration (ie: sand) because of it shape (no bottom) and bacterial action (birth/death/creation of enzymes and so on) it will force what fills its voids to the surface, from here gravity play a role in pushing the end products out of the rock. We call this shedding, and it can been seen very well when putting rock in dark light conditions.
Chris once the LR sits on a sand substraight it looses a couple of its advantages. The shape is now gone and it has a bottom (the sand), its bacterial action now becomes a part of the sand bed itself (asimulated), the tugor still works to a point but the gravity is gone so most of the detritus will actually be pulled from the bed into the rock. So when you look at LR hat is sitting on a sand bed you have to concider the rock to be just and extension of the sand, nothing more.
So in looking at the LR issue as it stand right now I think it would be safe to say that the LR is saturated with most form of N and P to the point at which it has lost most of its normal functions bacterially. The presence of ammonia in the rock (anywhere in the rock) will inhibit the production of an enzyme that is required for nitrate reduction, with this gone none will occur (dont worry it happens to almost all DSB's and simular) what happens instead is that the nitrate is turned into ammonium instead and just recycled once again. I would imagine that this is what is happening in your tank and has been for a while, this condition will eventually make the rock usuless and truely turn the rock into a producer instead of a reducer.
No problem though it can be fixed. Not having the rock on the sand is going to return the rock to a more normal conditon but it is going to take a long time as the bacterial filtration is very slow. If it were me (and it has been a few times, lol) I would remove a couple of rocks and boil them in very hot water (boil for a long time), this boiling will remove most of the crud in the rock through vapor transmission. Yes it will also kill all bacteria and everything else in and on the rock to. But when you reintroduce the rock into the tank it will be like putting a brand new vacant apartment building in to a over crowed neighborhood. It will be quickly repopulated by all the critters that once inhabitated it.
What this does is reduce the bioload on the remaining rock in the tank and allows it a bit more time (with out effecting the water quality) to recover. To summerize I would remove a couple of rocks and boil them, then allow them a month or so to repopulate and then do a couple of more. You shouldnt have to do all the rock, maybe just half and slowly over a period of time. Do this until you have regained your water quality and always rememeber to blow of the rocks as part of your regular husbandry.
Hope it helps
Mike