The sponge being large is fine, it may not look great but you could easily get some decor/plants to block the view. The sponge is just where the beneficial bacteria will colonize and where gunk will get trapped.
The outlet tube height does effect the function, and you do want it under the surface as noted. I had the same issue when I got my sponge filters at first, and I had to hack away the tops of the tubes. Because I didn't have a tool that gave me a super clean cut, I also made sure that I cut the bottom of the tube off instead of the top, so that my fish aren't going to cut themselves on the edges, as I couldn't get them totally smooth, but try to get as smooth as possible.
The current you create isn't effected by the size of the filter, but the power of the air pump. I adjusted my pump to a lower setting, as well as adding an air control valve, which allows you to cut off some of the air flow as well (and a check valve so that in case of power failure the water wont back up through the airline tubing). That will be how you dictate the power of the filter with ease, so I suggest adding those if you don't have them already.
