I had the torpedo on a dedicated loop in the sump and tried various layouts to minimize noise and splashing. I ran the filter with the return underwater and never had a problem with low oxygen levels. However, my system wasn't a nano either.

From speaking with Bill (aka Snake) the main factor for keeping the returns above the water and providing a high flow rate is to keep the DO levels as high as possible (almost to the point of supersaturation) and increase the rate at which the RN Bacteria function.