ok, from the book Reef Invertebraes, by Bob Fenner and Anthony Calfo (head dudes at wet web media) you frag a sponge like you frag a coral, allbeit you do it underwater. Clean sure cuts with a sharp blade to remove 'buds' attatch as soon as possible to a rock or plug via mono-fillament or super glue (how do you apply super glue under water? 
Apparently, according to this book, many sponges derive nutrition fom a symbiotic algal relationship, not with zooanthelle, but with cyanobacteria! yet another reason not to medicate to rid a tank of slime algae... good light, good current, will assist your sponge and it's frags in growing, it is greatly assisted by a live phyto drip as well apparently.
"Maybe in order to understand mankind, we have to look at the word itself: "Mankind". Basically, it's made up of two separate words - "mank" and "ind". What do these words mean ? It's a mystery, and that's why so is mankind." ~ Jack Handey