The greater your plant density the greater the demand for CO2 and nutrients will become. This is also true when you have high levels of light, more demanding plants. It is good to remember an increase to your levels of CO2 will also increase the plants uptake of nutrients, if the supply of CO2 is increased even slightly, the resulting increase in growth will increase the demand for all the other nutrients and another nutrient, the next lowest in availability, will become limiting.
Liebig's Law of the Minimum
Your situation sounds as if the diffusion method is insufficient. It is extremely important when adding CO2 that the levels remain consistent (pressurized systems are great for this) and that the CO2 circulate throughout the tank. Your wooden air stone will bump up against both of these issues. With age they get dirty, slowly reducing the flow of CO2. More relevant to your situation, if the bubbles are heading for the surface, is improving the flow of CO2 around the tank.
One solution would be to add a small powerhead to move the bubbles across the tank, dispersing the CO2 and giving it time to dissolve. This will at least address one of the flow issues.
I suggest you find a powerhead/needlewheel modification that you like. The more consistent and improved circulation of CO2, the better. There are a lot of powerhead modifications out there. A modified
Duetto Multi-Filter is the one I use, BUMP.
http://www.barrreport.com/entry.php/2-DIY-CO2-reactor-surface-skimmer