Any camera, even a high-end DSLR, can only handle a certain range of different levels of light. Better cameras handle it more smoothly, but there's no getting away from it. Do the best you can to get any sources of light that are significantly brighter than the tank you are trying to photograph (like glare from the top) out of the frame - the towel idea is a good simple solution. Even light sources that are out of the frame can create lens glare by entering the lens at an angle and bouncing around inside the lens without actually making it to the image sensor as anything but a cloudy looking glare.
-Justin