DOH!
With Prime, if your test reads for both NH3 and NH4, you WILL test positive for ammonia even though your fish are NOT being exposed to poisonous NH3.
I use the API reagent test for Ammonia (it looks like this might be what you are using). If it turns green IMMEDIATELY, you have NH3, which is toxic.
If it doesn't turn green immediately, but turns green after waiting for several minutes, the Prime is working, your fish are (mostly) safe, and you just need to be patient.
I wish I would have told you earlier but it's been so long since my tank cycled I completely forgot. I would recommend you get a Seachem Ammonia Alert:
It only registers toxic ammonia and when you combine it with Prime and your reagent test, should give you a clear picture of what is going on.