Java moss is supposed to provide the best cover for fry and it helps grow/feed stuff that they eat. I have a penguin mini in my 10 also. Im just keeping a community tank and raising the fry in there. I had them seperated out for awhile, but decided to put them back in after a like 2 weeks. Anyways a healthy fry should be able to escape your intake, and they generally stay away from open water. So what i did was just move the intake to one side of the tank and put a lot of cover on the other side. It eliminates a lot current in some areas allowing them to rest up.
Im not sure about otos, but maybe a bristle nose pleco would work fine for your fry tank. I hear they wont eat any moving healthy fry. You would have to supplement its diet with algae wafers, most likely. Which you may want to do with your oto also?
If you just want a bare bottomed tank to raise fry in so you can see them most of the time, most people use sponge filters for those type of setups.
Im by no means an expert on this yet, but i think most people will backup my advice.
Oh and when i had my fry in a seperate tank i didn't use a filter for it. I just skimmed the organic waste off of the top with a cup and then did a 50% water change everyday. None of them died, but since water quality is a big issue in growth i dont think this was the best route to go. This was in a 1 gallon tank also.
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