From your description, it sounds like you're getting air trapped in the impeller. The only choice for prevent that is your number 1 option. The other option is to use an external pump due to lack of sump room and install a backwards check valve at the top of your return. This option will have no-head loss. When you shut the return pump off, the check valve will break the siphon by letting air in. I think I saw this on Melev's Reef. It's on YouTube.
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