Filter issue?

Having an issue here that's got me stumped peeps! I can't for some reason get suction on my filter pump when circulating through the filter. If I backwash the filter, or I run the pump and open the filter vent valve, suction for days! We just bought this house, so I'm not sure of what the previous owner had done, or didn't do to the pool. When we pulled the filter the first time, the algae on it looked like dark green cake frosting. It was that thick! The filter elements, however, we're in very good condition. One thing I noticed though was that where the o-ring is located where the filter manifold meets the outlet pipe, he had tied a piece of mesh fabric around the connection. I took off the fabric, and put the filter back together. I noticed there was a gap between the o-ring and the seat. When I tried to put the DE in, it all ended up back in the pool. Now I have DE in the pool and no way vacuum it out! WTF is going on? It should be noted that we also recently discovered that our circulation lines to the pool are blocked/plugged so the pool return dumps into the jacuzzi. Help!