start seeds in Jiffy pots
 

I was wondering if I could start seeds in Jiffy pots, then when the roots start poking out of the pot just put the whole thing in the cup with rocks or do I have to remove the plant from the Jiffy pot?

I would remove the potting mix because sooner or later it will work it's way down the system and make a mess in your nutrient tank. Let them soak in a pan of water for awhile to loosen the Jiffy pots.