It is possible to cycle with fish however it is frowned upon because when the ammonia, nitrite and nitrate levels rise it becomes stressful for the fish. They are hardy fish and may appear healthy now but after several weeks of unfavorable levels they may start to stress.
Im not 100% sure on adding mature water from other systems so i'll let someone else help ya with that one. I guess it could contain some beneficial bacteria however it could also include other nasties you dont want to add to your system.

very true. However, both their tanks are in pristine condition. They baby the sh!t out of their tanks lol

You would get some beneficial bacteria from the water see if you can get some 200 micron filter socks as this will catch some of the nasties that you would not want in your tank. I would ask them if they have had any fish show signs of ICK or any other sickness as they could have very healthy fish that can fight off ICK. But it can still be present in the tank water and seems you have fish in yours it would give the parasites a place to grow and reproduce. You could have done a cycle with a raw shrimp tail, all the biological bacteria need is something to feed on and grow as your system starts to mature. You have read some stuff but a tank can take several months to mature to a point where you can put just about any fish in it. Some fish need a very stable and establish system or they will not make it. just like a Nem you should not put one in a tank until the tank is fully established. There are a few Nems that will survive and thrive when in a tank that is not very good but it is still not a good idea to put one in.Some fish need certain conditions to survive long term and that is what we are all looking for. Too recreate the oceans reefs be it a passive, tang , or predator tank. Just make sure that you provide and establish the right things for the fish you want to keep before you add the fish.

Bill

I think be patient is the key here. We all know the rush feeling of get a salt water tank setup and have nice fish swimming around. But doing that quickly will make you pay a bigger price if your tank did not go through a complete cycle.

You will face many challenges such as fish dying, high nitrate level, all kind of micro algae to deal with. Like Bvlester said, let the tank fully cycle before you start adding fish or coral. You will then enjoy the benefit instead spending more money to battle the problem

Short term pain is long term gain.

Cheers and good luck!

He was wrong and if he is a LFS run don't walk to another LFS. If you are new to the hobby it is easy to make mistakes when you rely on people who should know better.
The ARE being stressed.

water contains zero beneficial bacteria........all you will be getting from your friend is used water.....as soon as that rock hits the air it will have die off and adding 50 pounds to a tank that has already started cycling will cause another cycle......I agree with naesco.......bad lfs advice about the damsels....

Just a small update.

Ammonia 0
Nitrite 0
Nitrate 20

So..I am still waiting for the ammonia spike, but every time I test the water, its 0.

I am currently prepping some water for a small water change, to lower the nitrate levels. If the nitrate levels continue to rise.. does it mean my tank is cycled?

My skimmer is pulling in some brown gunky stuff every time i throw some flake food into the tank for the hermit crabs and snails