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I would leave the diffuser off. You will get a slightly more intense light with it off, which the seedlings will like.

What kind of plant is being affected? This will help us identify the disease and provide the right advice on treating it.

I'm assuming that you have tried the suggestions from the following article: https://www.gardeningknowhow.com/garden-how-to/seeds/preventing-white-fluffy-fungus-on-seed-starting-soil.htm

Evidently, the soil is still too moist; otherwise, the fungus would not grow. Are you watering too often? If so, allow the plants to dry out some. Let it air out for about a week, monitoring it often with your finger for dampness. If this doesn't help, there could be a problem with your potting soil--too heavy--or the container itself--poor drainage (check drainage holes). If the soil remains damp, you may want to consider transplanting (if feasible) using a lighter potting soil. Also, move the seedlings to an area offering additional light. When you do water again, try watering from the bottom rather than the top.

If they are becoming "leggy", this indicates that they are not getting enough light. Move them to a location where they will get more light or move them closer to your light source.

Here is an article that you may find helpful: https://www.gardeningknowhow.com/edible/vegetables/vgen/when-to-plant-your-vegetable-garden.htm

No, once they start to bolt, you cannot stop it or reverse it. You will have to restart them.