Sounds like your doing good. Im surprised the humidity is low. Im not familiar with wood substrate I just use craft paper in all my enclosures but i know 1” is standard. Maybe the way its being heated and its suck a small tank that its drying out quickly. Ive never used anything smaller than a 40gal breeder. As far as insulating the inside ive never heard of that. I do know people that have used decor on the walls on the inside like foam and painted like rocks but never for humidity or insulation, thats always outside the tank. I think you probably have a hard time because of the amount of heat you need and you’re putting into a smaller tank. I thought you said you were using a 20 gallon, If that’s so your water bowl can’t be that big. My Bowls are 5qt. (12” wide Circumference and about 6” deep)
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Where did you see "wood substrate"? Maybe I missed something. Or is that what coconut fiber is AKA?