Feeder fish are a tough subject, most people steer clear of them but if the guppies are raised right, they can be fed. But personally, no thanks :P
I've heard of sponge as a substrate, I'm not sure on how well it does but I can tell you, it's not natural for a frog, and if it's not natural, it can lead to stress.
I can imagine 1000$ is a big amount to drop for a frog, but if it's really a Aurita, they should be able to find someone to buy it.