Okay, I think the roots are good to go. They aren't great looking but they are good. Don't worry though, when you grow it nicely, the roots will look much better than that. You don't need to use the KLN. It'll be fine without it.
As for the pot, the plant can be potted in one size smaller. Like I said before Michael's sells small pots.
Just use some small seedling bark and some moss on top.
The only difference from what I advise now rather than previous is to water every other day.
The advice I gave first was for small seedlings. You have a larger one, so you can start cutting back on the water a bit.
I think the problem why you thought the seedling looked dehydrated was not because they were dehydrated. Rather, they were sunburnt.
Grow in bright shade. When they get about an inch or two taller you can start growing them brighter.
Hope this helps out.
Don't worry about the damaged leaves, they'll fall off on their own when the plants get larger and develop more leaves.