So we move on to the BIG question...... If the DE is making the water cloudy (meaning it is pushing through the filter and into the pool, I really want to know how your filter was THEN able to catch that DE (the same DE that is just washing through the filter making your water cloudy) in order for you to backwash it out (the DE that's just circulating with your water)?
Dead Algae particles are smaller than DE, how come your filter can catch these???? With DE added, you increase your filtering efficiency and now catch more of the dead algae particles per volume of water filtered.

Maybe it is a small filter, maybe the sand is low, maybe the sand is veined - any which way, I would open the filter and do an inspection, if the DE can wash through, so can dead algae since it's even finer that DE.

Diatomaceous Earth has a unique combination of physical properties:

High Porosity: Up to eighty-five percent of the volume of Diatomaceous Earth is made up of tiny interconnected pores and voids. It is made up of more air than diatom.

High Absorption: Diatomaceous Earth can generally absorb up to 1 times, its own weight in liquid and still exhibit the properties of dry powder.

Particle Structure/High Surface Area: Diatom particles are characterized by their very irregular shapes, generally spiny structures and pitted surface area. They average 5 to 20 microns in diameter, yet have a surface area several times greater than any other mineral with the same particle size. Diatomaceous Earth increases bulk without adding very much weight.

It is the irregular shape of DE that allows it to cling to the sand - almost like reaching out and grabbing it. Effectively, the DE will grab the sand as it moves through, and get stuck within the first inch or so of sand, clogging the spaces between the sand particles - just like the dirt would.