Only use pool filter sand. No play sand. Yes, you can add a little DE to your sand filter. Carl, Al, and I do it and get good results. Add only a little -- enough to raise the pressure by 1 psi. Wait awhile after you add it before deciding you need to add more because you won't necessarily see an immediate rise. If you add too much, do a quick backwash and blow it out and then try again with a smaller amount.
As far as pump sizes, 1.5 hp is way too powerful for your pool. When my 1 hp pump died last year, I let Al, (Poconos), my fellow moderator and our resident pump expert pick out my pump. He chose my 1/2 hp pump which he felt would be adequate and save me some money on energy costs. I initially thought it wouldn't be powerful enough, but he was right. It has been perfectly adequate for my pool. He is an electrical engineer and knows what he is talking about and when he recommended it, I trusted his opinion. Turns out, he was right. (Hear that, Al? I am saying you are right about something. Not everything, mind you--- but about my pump, you were!!
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For the winter, some years, after we drain it, my husband has wheeled it into our shed for the winter; sometimes we just open the plug and cover it with plastic and leave it outside for the winter. We typically do have to replace the pressure gauge each year, but that is cheap so it is no problem.
Hope this helps.
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