Hi Chris;
DE getting into the pool usually means one of three things:
1. A hole in one of the membranes covering the grids or fingers.
2. A broken or misplaced air relief mechanism.
3. An internal leak in the multiport valve (if you have one)
DE will NORMALLY fall to the bottom when the pump's off, but some should remain on the fingers. If the DE is IN the filter, little or none of it has coated the fingers, then a fourth possibility would be breaks or cracks in the internal piping of the filter.
So, pretty much no matter what, you need to fully disassemble the filter, and check out all the internals. Here's the manual for your filter: http://www.hayward-pool.com/pdf/manuals/Manual257.pdf

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. (the tube sheets are the plastic disks that hold your filtering 'fingers') 

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