This year was my first experience with NFT and it came as a mid season switch over from EnF, so take my thoughts as you see fit. I would let my medium touch the ground. why? Because it needs contact with liquid to keep the medium wet until the roots grow out of the medium and into the troughs. Also, eventually, the roots are going to provide way more blockage of the troughs than the medium, so I wouldn't worry about it.
I would drill the holes for a snug fit. I use net pots and will be using hydroton next season. this is not an airtight fit so air getting into the troughs shouldn't be a problem. A snug fit will however help limit light penetration which is the major factor of algae growth. If you're growing outside, it will also limit access points for mosquitoes to enter the system.

I use round 110mm (~4.3 inch) PVC pipes and use them as a flood and Drain (ebb and flow) until the roots hit the bottom.

Hi ramsay22,

When using rockwool, the cubes have to either touch the flow or they need to get watered (with NS) manually until the roots touch the flow. Or, seedlings have to be grown (in the rockwool cubes) by a different system in the first place, until roots are long enough.
- The upper SURFACE of the rockwool is more prone to algae than expanded clay pellets.

- A very SMALL gap around cubes or pots will not likely allow algae to develop in the system. Algae need DIRECT sunlight on a humid surface or some nutrient rich water to develop. Though, try to make them fit to play safe.

- No need to leave space for oxygen penetration, as it is delivered with water flow anyway. As mentioned already, the surface of the rockwool is much more prone to algae.

Same rules apply with expanded clay (basically) except that it may not be good enough to have the net pots touching the flow. In case of using expanded clay, I personally recommend to growing the seedlings outside the system (or in another setup) in the original net pot until some roots grow out of the net pots.

PS: In fact it's better if the net pots are suspended and do not touch the channel floor (assuming that roots are developed enough to easily reach the floor, of course) because all roots then drop directly in the flow from top down. Also, the pots don't stay in the way of the nutrient flow. It may not play a major role (means it will also work the other way round), but still....