jamromhem
Do you have any pictures of the yellowish growth? I can't see it the picture you posted. Also are you sure it's a growth, and not that the
nutrient solution has dyed the
growing medium (polyester batting)? If your sure it's something growing, I would try some tests to see if it's something airborne (like spores or bacteria) that gets on your growing medium, then grows with the access to water. It may even be something on the growing medium from the factory when you bought it (unless it was sterilized). If it isn't sterilized, you can sterilize it in boiling water for about 10 min. That way you can run a test with both sterilize growing medium, as well as unsterilized to see if you get the growth from both. If so, I would then run some tests to see if it was something airborne. That may be a bit harder depending on your resources and location.
You said your seedlings began to die when you took off the humidity dome and moved the light closer. That sounds like the plants got to warm and dried up. By removing the humidity dome, that just allows the seedlings to dry out that much faster. Seedlings are very delicate plants and they respond very quickly to changes in temperatures, as well as humidity levels. The roots cant get too wet or they suffocate from lack of oxygen, but at the same time the plants leaves cant dry out too fast either, or the seedling dries up. So the humidity dome keeps the leaves from transpiring to fast (holding moisture in the plant tissue), and without waterlogging the roots.