A repost of a terrific hint: How to Cure Damping-Off Disease
The fluffy white substance on the surface of the potting soil is a seed sprouter’s nightmare. Damping Off is lethal to newly sprouted seedlings. Since I am trying to be as organic as possible this year, I wanted a remedy that would not break my resolve so early in the season. I searched the web and found some odd fixes: lemon jello, ground up moss sprinkled on soil, cinnamon & sand. There were also two remedies I decided were the most logical for me to use. One idea was weak mixture of hydrogen peroxide and water, and the other was a weak solution of chamomile tea. I opted for the chamomile tea.
I went to my local grocery store and picked up a box of tea with ingredients of chamomile alone. There were many other mixes, some with lemon, which probably would also work, but I was taking no chances. When I arrived home I boiled water, steeped one bag in two cups, and let it cool down. I used an old hair spray bottle to treat the affected area. These bottles produce small droplets. A bottle with a heavier spray might beat the small seedlings into the soil, killing them even quicker than the damp-off disease.
Twelve hours later there is no sign of the damp off disease on the soil. To read more check out this forum on Gardenweb. Gardenweb Damping-Off Forum Responses.