Let me start out by saying that I have never had corals with octos. But I can tell you that it shouldn't matter if the rock is stacked or flat, because if they are small enough for him to move, they will be dragged all over the aquarium.
Think of octos as saltwater oscars- with arms.
My opinion is that they wouldn't bother the polyps if they can't move the rocks.
Depending on your tank size and layout the lights could work if he had places to go to get out of the light. I do think that he may hide more because of it. Dan is playing with his cuttlefish and mine hides all the time. I think the difference is that I have MH lighting on my 30 gallon, so he stay in the caves. (or maybe Dan is more likeable. )
Hmm...this could be an interesting experiment with lighting and octos then. If I had another 48" tank, I would just switch the brighter lights to it, but the longest tank I have is a 40 gallon, which is about a foot short. I don't want to sell this fixture, so maybe i'll just put the NO flourescent strip bakc in it from when I bought the tank. I think i'm gonna get the octo from either Marine Depot Live, or Saltwaterfish. Not 100% sure yet, but i'm leaning towards MDL. I need one that is active, and out all of the time (well, the majority) as I have about 100lbs. of live rock in this system, so if he wanted to act like a dwarf, he very well could. I'm going to have to move my clam, YWG, blue green reef chromis, and blue tang (possibly).
Ok, well I am going to put him inside one of those little pladtic critter trail things, with holes drilled in the sides for circulation, and see if he looks to be stalking the blue tang from within the smaller cage. If he does, then the blue tang is moving to another of our tanks. I've decided to move all of my corals/inverts to a 20 high that i've had set up as a small frag tank for a month or so now. It should make a nice mixed reef from zoas to SPS. I'm going to stack the live rock in a back corner, so I will have plenty of options for toys in the open space, and he can roam wherever he wants to. I already have some seashells in the tank, but i'll get some more. I'm going to make him a den out of PVC with live rock glued all around in. I want it to be vertical, so he comes out of the top of it, but I realize this may stress him. I'm starting to get creative with toy designs, and water bottles...:D
Reallife experience with my first octo and his fish friend...
My bimac calamari was in the tank for about 3 months before I had to move a damsel in the tank because his old tank was being taken down... I thought he'd turn into food but my octo didnt really mind him at all... Infact... this damsel turned out to become one of my favorite fish, he was just asking to be eaten, he would swim up to Calamari and follow him around the tank, but Calamari didnt really care he was there... And now that calamari has passed on, the damsel is all alone in that tank by himself *cry*... But he's just one of my favorite fish because you can walk up to the tank and the damsel fish will swim up to you , and if you walk around the tank, the fish will follow you... quite strange this fish is like a puppy...
Err well anyways I have to agree with everyone that whether your octo and hippo will get along is up to their personalities ^.^ - I realize you probly already came to that conclusion, but I just wanted to tell my story ; ;