Neat idea. Have you considered just using an oasis cube instead? Much cleaner, and they are cheap. If you don't know what they are, they are a special type of foam that absorbs water and retains oxygen as well. It breaks down enough for roots to push through it easily. If you want to be REAL cheap you can go to the craft store and buy a huge brick of oasis foam for $6 and cut it up into small cubes yourself with a razor (this is what I'm doing for now).

Here is a link to someone who sells Oasis cubes:
http://www.greenhousemegastore.com/products.asp?dept=1032

No I didn't know of them so thanks! Wish they were round. So that foam brick at the craft store, is it the stuff they use to hold plastic flowers?

Yes, that is exactly what it is, although I always thought it was for plastic flowers however the Oasis foam I bought at the local "Michaels" craft store could be used for both plastic and live flowers (says so on the packaging). It is great for live flowers since they can take up the moisture that the foam wicks in. The brick I bought is about 12"x7"x10" or so. Could cut that up into lots of starter plugs. I'll be starting in that, then dropping them right into net pots either alone, or will put down some perlite, then the cube, then fill in the sides with perlite as well. It's similar to what I'm doing already with another kind of "organic" plug that doesn't fall apart like a jiffy plug, but I am noticing fuzzy mold growing on the plugs which leads me to believe they are not sterile so the foam is a great option.

To cut the plastic foam plugs I'm currently using in my system I got a piece of thin-wall metal tubing and sharpened the edge of one end with a grinder wheel. It goes right into the plastic foam with a little twisting action. Bet it will cut the oasis foam the same. Thanks!

I was thinking exactly the same thing; a sharpened hollow tube to push through the cube.
Alternatively you could cut the cubes into squares with the diagonal dimension slightly larger than the diameter of the pipe insulation opening. That way you could 'squeeze' them into the hole and they'd hold nicely AND you won't have any waste from the cube.

And they say you can't fit a square plug into a round hole...ROFL! I kill myself sometimes...Great idea grizzman.

Let us know how it turns out.

FYI: You don't need to use any nutrient in the water for seed starting. Seedlings get nutrition from the endosperm contained inside the seed itsself.