I think a merc will do fine in a 29, but they only live a few months after getting them, unless you are lucky enough to get CB, eggs, or (more likely) a pregnant octopus. Baby mercs can be raised on mysid shrimp/amphipods/ very large copepods.
Also, the sump is so that the ocoptus doesn't mess with the heater, protein skimmer, etc. Drilling the aquarium is a good idea.
Go on tonmo.com for a lot more information on keeping octopuses. Good luck!
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