When I used brown, powdery "brand name" bags of mix, I saw the same thing you did: dry peat doesn't like to absorb water.
Then, once you do get it wet, it holds TOO MUCH water. In combination with the finely divided nature of the peat, that meant too little air in the mix. That helped my seeds to rot - or, said another way, it made my tendency to over-water even more lethal.
I hate that cheap stuff!
But some people can make it work for them.
Now I use GOOD potting mix (a local knock-off of ProMix) plus screened bark shreds to open up the mix even more. That might make it wick poorly, for bottom-watering, but I add a little top-spraying and that works out OK.
Here's how I bottom water my 1020 trays: lay some cotton flannel or toweling in the tray.
http://garden.org/ideas/view/R...
The other way I tried to bottom-water just got clogged my bathtub's drain with potting mix.
