Hello Ron,
I've started started using the same method to germinate seeds this year and have found my germination rate much better. Seems to work for all my vegetable seeds. If the roots get a bit too long before transplanting I just place the whole paper towel onto some compost, a fine layer then on top and they grow fine from then on.
From your last post, I don't think Vermiculite is your problem, vermiculite doesn't hold onto water it helps the drainage, I'm guessing that the peat pot is drawing too much water. Instead of the pots sitting on a capillary matt, I use the Eartainer method but with each seedling pot sitting above the reservoir with a small strip of capillary drawing the water up. Works great for me.
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