Joe,
It is sphagnum peat moss - the fine, non-stringy kind.
Chris,
Here is a link to my photo journal of this tree:
http://www.bonsaix.com/trees/trident.htm
The grafts are to add much needed surface roots. I noticed a little variegation on the seedling leaves as well.
Thanks for the reassurance that the leaf droop isn't something to worry about too much.
I fertilized this week, we'll see if that helps them perk up a little.
Thanks,
Steve