I've never heard of sand being specifically cultured and sold for freshwater environments, so I'm basing my answer on
What I know about marine environments.
From what I can tell by your post,
It appears that your live sand has died for two reasons.
1. The sand was put in fresh water.
2. It wasn't provided a food source.
There are two kinds of live sand that I know of that are sold, one is natural coral reef sand that is collected live from the ocean, the other is non-living coral sand that is cultured to make it live.
What makes it "live" is the microscopic biological bacteria, crustaceans, and micro/macro-organisms that grow on and live in it.
These organisms need marine salt water and a food source in order to survive.
The dead bacteria, crustaceans, and organisms is what is clouding the water. It's unsafe to put any fish in this tank.
You will need to remove and dispose of the sand and replace it with regular aquarium sand (non cultured sand made for freshwater and/or salt water environments) or gravel and start over.
Once you set the new tank back up and are ready to add your fish, take ALL the filter media (the cartridge and everything else that is inside the filter you are using with the 10 gallon) and place it inside the new filter.
This is so that you do not mess up the biological filtration your filter has likely already developed.
If you did buy sand from somewhere that was cultured for freshwater use (which would have been a big rip off),
It could have died due to a
Lack of food source or chlorine in the water.
See, every substrate, whether it be gravel, sand, crushed coral or what ever will in fact become "live" as the
Biological filtration process (also known as the aquarium cycle or the nitrogen cycle) builds up inside the aquarium.
The gravel inside your 10 gallon could technically be considered "live" because it probably has beneficial bacteria
Living on it.
There are different kinds of bacteria, etc that develop in different water conditions like fresh and salt.
So bacteria that was cultured in salt water will not live in freshwater and vise versa.
The reason why it is so popular with marine aquariums is because the very expensive fish are incredibly sensitive to the cycling process and easily die due to any amount of toxins that develop inside a non cycled aquarium.
Adding live sand, rocks, and/or coral at the same time as the fish give you an environment that is immediately cycled and will convert all waste into a non toxic form, therefore making the environment safe for the fish.
You could remove the gravel from your 10 gallon and place it in your 29 gallon and you will have added "live" freshwater gravel to the tank...
I hope I'm making sense... and not confusing you.
If you are confused about the aquarium cycle and all the bacteria I'm talking about,
You can read about it here Aquarium Cycle/ The Nitrogen Cycle
If you have any questions, please feel free to ask.