Fish hiding, sick, or just its personality?

Question
I recently obtained 5 (a little over) 1-inch goldfish and 3 ghost shrimp which are now in a 2.5 gallon tank. The water is filtered and treated with conditioner and salt. There are a few plants along with a large shell and "hut" (the kind used for hermit crabs) large enough for one to hide. Right now it has been about a week since they were first placed.
I lost one in the filter, which I attributed to lack of sufficient swimming space (as I had another prop which I took out afterwords), so I adjusted the tank to allow for more.

Now I fear I am in danger of losing yet another one, my all black Kage. He has been acting really strange these past few days, sitting on the bottom of the tank, mostly in the same spot, and now he has confined himself completely in the shell. Occasionally he will come out and swim around like there is nothing wrong, and I know he has not died quite yet (at least I hope he will still be alive tomorrow) because in my worry, I will rock the shell a bit and he will pop his head out. I know I probably should not be doing this (only did twice), but I am paranoid as I had 2 larger goldfish before this pair and unfortunately managed to shock them to death by doing a 100% water change (one had died with its head in the shell).

So I am trying to do everything right now. I did a gallon water change yesterday and have checked ammonia levels, but don't have kits for the others, yet I will make a rough guess that they are fine based on the fact that my other fish and shrimp are VERY lively, not even bothering to sleep at night. And I know the shrimp are supposed to be very sensitive to chemicals should there be something wrong. So I don't know if it is nitrate poisoning or something similar (going by the closest symptoms I could find, yet no bending or anything). But it's only been a week, so it seems too soon.

However, when Kage first was placed into the tank, he had a habit of getting his head caught between the gravel and a certain plant branch. So I am not sure if he just likes burrowing his head in small places (have a bird that does the exact same thing), and thus nothing much to worry about. Also, he has always been more prone to hang out towards the ground (hard to find often as he matched the gravel). But his tail has never been so droopy.

But this morning I noticed that his tail had been a bit eaten. I don't know if this was done by the filter (based on my now dearly departed's appearance) or the shrimp or the other fish. So maybe Kage is just hiding from it/them. I know that fish bullying might be a probability as the other 3 are all colorful and Kage is black, but they never seem to be bothered by him. Yet they occasionally stick their heads into to shell, but then come straight out. Not sure about the shrimp as I have seen one approach my fish before, but they don't go in the shell. But this is only recent, so I don't think that is the initial cause as he had his tail perfectly fine yesterday.

The only other odd things that I can think of was my moving him to a hospital tank (where he did his normal lively then ground sitting behavior) and ended up putting him back in shortly after. I also used a chopstick to fix something (avoid putting my hand in) which he tried to nibble on prior to current shell isolation.

Won't eat unless I force him to come out/place food in shell, and even then, not very much. Should I put him back in the hospital tank? My resources are kind of limited though, and it's probably not the best place (in short, it's a jar). And I don't want to put him through unnecessary shock...

Sorry so long. Thank you for any insight you may have!

Answer
Hello Kai,

Okay, Kage may have fin rot.  With his tail looking shredded, this is one of the first signs, but it is probably something we can get hold of, if you can get him into a regular sized aquarium.

Here is my first bit of advice, along with a total explanation why I state this:

They are in too small of a space to support their lives.

When fish are cramped like this, the water filter cannot possibly do its job.  This causes the poop to stay in the water and ammonia and nitrites and nitrates form.  Ammonia will literally burn the skin, tails and fins off of fish!

This is what is going on with your fish.

Goldfish - Goldfish require 5 gallons EACH as babies.  As adults, as much space as 25 gallons to 50 gallons is required per fish, depending on the full grown size.  You have way way way too many fish in a 2.5 gallon aquarium.

A 2.5 gallon aquarium can support a grand total of 2.5 inches of fish.

The rule of thumb is 1" of fish per gallon, but that does not apply to goldfish.  They are heavy poopers. They are pond fish being kept in tanks by people who love them, and it's very obvious you really love your fish, but they simply require a much, much larger space.

Kage will become more friendly and outgoing as soon as he is not cramped.

The tail - Kage's tail isn't "eaten".  Ghos shrimp are non-predatory.  His tail is rotting off because ammonia levels are too high.

Water changes, daily, must be performed while an aquarium is cramped like this.

25% needs changed out for fresh water daily.  Dechlorinate the water first, before replacing it.

The hospital tank isn't going to help.  A jar has no way to filter or get circulation.  Kage would perish faster.

I feel really bad for you and for your fish and I wish I knew someone nearby you to loan you a 10 gallon aquarium, because that is the minimum size that these fish require for right now.  

I'm so terribly sorry it has to be bad news.  It is obvious you truly love them.  I wish that they were in a 10 gallon for now.  They would live longer.

Eventually, they will need much, much more space, however.

Here is a good article for you to read.

http://www.suite101.com/content/goldfish-righting-abuse-with-proper-care-a292985

Kai, I hope this will help you understand the keeping of goldfish better and that with my guidance, you can get little Kage into a larger place, where he can be happy again.

If you have any questions, please feel free to ask and to post a followup.

Happy fish-keeping!

Renee