Have you taken a look at http://www.loaches.com/articles they have some excellent articles.
The main reason for the high flow is to have highly oxygenated water, you need to have disturbance on the surface of the water to drive off the CO2 and help the O2 dissolve.
I've also found that the imported hillstream loaches can be sensitive to nitrates, so water changes are really important, even more so in a 2ft tank.
And I wouldn't worry about them escaping.
Personally I would prefer a three foot tank as a minimum size; but I like big tanks and consider 3ft to be small. I'm also not sure about sand, I use 3-5mm brightstone with large river worn rocks for my substrate.