Your batting is catching fine particles of iron and rust (iron oxides). What kind of filter do you have? I suspect that a DE filter or a high-quality cartridge filter would be able to catch such particles as well, but perhaps not a sand filter.

There is a commercial product you can buy called The Slime Bag™ which filters down to around 1 micron so even finer than a DE filter. Sounds like you've found something homemade that works quite well, at least for metal particles.

Metal sequestrants hold metal ions suspended into solution. They don't do anything for fine particulate matter which is what you are filtering. No physical filtration will remove metal ions -- they are dissolved in solution just like salt dissolves in water. So even though you have removed most or all the particulate metal solids from your pool, you could still have metal ions and should have your water tested for iron. If it measures high (say, more than 0.3 ppm) then you should still use a metal sequestrant to prevent staining.

Some people have talked about intentionally shocking and raising the pH of iron-filled pool water in order to intentionally create rust that can then get caught in a filter, but such a process can also stain pool surfaces so it's not a foolproof method.

Richard