I have started a 29 gallon tank its been a week and a half with my penguin 200 filter and have taken the bio wheel off completely leaving in two filter cartridges. I do not have room for a skimmer or sump. I have 32 pounds of live rock and the tank is at 78 degrees.I have one power head as of now but will have another one soon. will just a hob filter be okay for a tank my size should I upgrade to the emperor 400 hob filter? also there are little brown sponge like particles on the ground I think my emerald crab could be breaking off pieces of the live rock what do you think this could be? and last I bought a t8 coralife light bulb for my hood what kind of corals could thrive on that.

Congrats on starting the tank first of all!
I think that filter should do a pretty good job i used two AquaClear filters on my 29gal reef but together they were pretty much equal to yours. I would recommend that you get a HOB skimmer before you start adding corals, but I have seen it done without one(more maintenance is required without). Im not sure about what may be on the bottom of your tank by that description can you get a picture?

For your lighting: I personally have never seen corals under a single T8 bulb. When I was looking into lights for my 29gal, my research showed me there were basically 3 options.

Power Compacts (PCs):These were the cheapest approach but they would not be enough light to grow anything other than softies.

T5 High Output (T5HOs): This what I ended up getting. They are priced in the middle. These lights were enough to grow most all LPS corals and softies. I tried some low light SPS corals but they didn't do well. BUT you can get a very nice T5HO fixture that will be able to grow SPS but they were out of my price range.

Metal Halides:At the time and still to this day for the most part these are pretty much considered the best out there. They are able to grow any coral given you have enough wattage of course. In my opinion they seemed to look the best but I really just like to see the sun light dance across the bottom. The downside to these lights is that they can raise the temperature of your water too much if you don't have a way to cool it down. Most people end up running chillers with these.

My recent research has shown me that LEDs are making a big stance in reef lighting now. They are great because they consume very low power and don't add any extra heat to your tank. I hope to get some soon I won't get in to them much now because I would end up writing couple pages haha.

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It has become more than a hobby! My 29gal Dream Reef DIY Build

The HOB should be converted into a mini-refugium.. add some live rock and macro algae into it and get rid of the filter material it has in there now. How many watts is that T8? For your 29 gallon, expect to have to use about 300 watts of T8 to grow coral. It would be a better buy to get some LEDs for it. You could build your own for quite a bit cheaper than buying a fixture. Plan on using about 60 watts of LED power for it. Its fairly easy. Otherwise, you'll have to get some T5's or MH for that tank and still expect to use at least 200 watts.

How can i easily make it into a fuge

I've done it on my HOB for a 20 gal. Just remove all but a very front filter casing (to hold everything in from getting spilled into the tank) then add some live rock and sand to it as well as putting some macro algae in (chaeto works well because its like a filter anyway, small and stringy) above the live rock. Put a small light over it, something like a 13 watt CFL works. I only run the light for as long as i run the tank lights so just add it to your timer circuit if you have one.
It really helps keep the nitrates and phosphates down (when the tank is properly fed of course). I have zero nitrates every time i check and below 0.25 phosphates all the time if i have any at all. Simple, cheap, and works.