I feed them small earthworms, reg wigglers, frozen beefheart and bloodworms - and I've recently switched to live blackworms, since the place I got my other live worms started selling me moldy and dead ones (ew).
As far as the substrate goes: my Tarichas eat out of my hand, but my other newts eat out of a feeding dish - it's harder for the worms to get out of the dish, and they usually get eaten before they get away to get lost. You might try that and see if it helps
I'm going to be switching to sand, too, this summer, when I rearrange all my tanks. I'm sick of cleaning gravel, hehe.