bait tube- the bait tank alternative

That's exactly the set up I used-- the little square cap.  I managed to use mine down in SD last month, and it actually worked great.  I just finished a 1 1/2 inch version for anchovies. 
The tow line needs to have a swivel on it, or the line gets twisted.  A lot of folks in SD put the rope on both sides- to hold it against the yak when drifting- this seemed like overkill to me, since the darn thing floats anyway.

Do you have pics of the swivel and line?
What type of swivel did you use?

sorry for the slow reply...was off in San Diego.

I used the biggest honking swivel I could find at western boat...darn big thing- sorry I don't have the size #.  Its not like that swivel has to hold any weight, it just has to keep the line from twisting.  I used a 3mm perlon line attached only to the front cap,and just long enough to clear the back of the boat.