1000W is not too strong for seedlings. I'd get them out of those dixie cups immediatley. Those things are the devil! If this is your first grow, i'd invest in some vermiculite because it really hepls with over and under watering. Which your plants look over or under watered. But bigger pots should do away with that. It seems like the more soil you have the longer it takes for it to dry out. CFLs would probably be awesome until they had 4 or 5 nodes, but a 1000w will def. work. Take them 24-28'' away and wait until you see them start to stretch, then I'd lower it to no less than 15 just to be sure. I use a 400w mh and my plants are like 10 or 12 inches away, but then again i have a 400cfm pulling in AC'd air....