^^ This!That towel is way too wet. Definately get them out of there and into soil or something
That is the way it should be done.^^ This!
I used to have the towel soaking wet and I'd wonder why it took so long. Now, I put them in the towel, wet it, squeeze the towel to get rid of all the excess water so the towel is just damp, and then put it in a ziplock. In 2d, I have 1" taproots, and then go straight to soil.
Basically: You're over-watering the seed.