Hi Heidi,
Your prefiltering system might work a lot quicker if you were to run the water over a trichlor puck just before it hits the batting--the high chlorine should help precipitate the iron and cause it to fall out of suspension and stain the batting.
You are going to need to get some chlorine in the pool to keep algae from growing, but you don't want the level to be too high right now because of the iron in the water. You need to test your water with a drop-based kit (strips don't count!) and report back levels for pH, TA, hardness. We highly recommend the K-2006 kit (see the link in my sig), but if your local WalMart has the hth 6-way drop kit, that will work for now. While you're there, pick up a few gallons of plain, unscented, generic bleach.
Take a few minutes to read through this thread--it was posted last summer by someone with much the same situation you have, and it might be helpful:
http://www.poolforum.com/pf2/showthr...ll!&highlight=
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