Rawfish,
The comments about the line being dirty are sure enough true. A clean dressed line floats better than a dirty line.
I noticed you said you tied your leader to your fly line using a blood knot. That may be creating a bit of mass in a small spot causing your line to sink, or the current could be exerting a lot of pressure on the larger knot, causing your line to sink.
If your having trouble with a nail knot check out the knot tying section on this site, or switch to another system such as a braided loop connection. Of all the braided loops I've tried, I like Orvis or Rio the best.
Hope this helps.
REE
Happiness is wading boots that never have a chance to dry out.