Hi Rachael,
the pic, that does look like an axolotl, not a tiger salamander. So just to put your mind at ease, no morphing should be happening. A spontaneous morphing of an axolotl is extremely rare so if you see his gills deteriorating again, it's a serious sign of something wrong going on - check your water levels immediately.
If his gills are coming back, that's good. Is he calming down now? Some of mine will go up for air gulps every so often - about once every 2-3 hours sometimes. Watch his gills, they will point forward in times of stress - the tips will face forward and his tail can curl right at the tip. If you see this at any time, it's a good indicator something's not right.
Gravel really should not be larger than 1mm to be safe. Most aquarium gravel is larger than this. Sand is safer and you can use children's playsand like you can get from HomeDepot, Lowe's, or even some Wal-Marts. If you want a different type of sand, Tahitian Moon Sand is used often and can be found at some pet shops or online. If you get playsand, it's a good idea to sift it for gravel first. Then rinse, rinse, rinse some more until you see the water run clear.
Once you have your kit, it will be easier. If you get your water tested at the pet shop again, make sure they tell you exact readings - telling you readings are within the norm or okay can vary from person to person and doesn't mean they're okay for axolotls.