The question is
Let $a_1=a_2=97$ and $a_{n+1}=a_{n}a_{n-1}+\sqrt{(a_n^2-1)(a_{n-1}^2-1)}$ for $n>1$. Prove that
(a) $2+2a_n$ is a perfect square, and (b) $2+\sqrt{2+2a_n}$ is a perfect square.
You were on the right track with squaring the given recursive
formula. You just need a little bit more work to follow to get
the final answer.
Define a sequence of numbers with initial values (note that $\;a_2 = 97$)
and recursion
$$ a_0 = 1, a_1 = 97, \;\; \text{ and } \;\;
a_{n+1} = a_{n}a_{n-1}+\sqrt{(a_n^2-1)(a_{n-1}^2-1)}. \tag1 $$
Isolate the square root in $(1)$, square both sides and simplify to get
$$ (a_{n+1}^2+a_n^2+a_{n-1}^2)-2a_{n+1}a_na_{n-1}-1=0. \tag2 $$
Define another sequence of numbers with
$$ b_n := \sqrt{2+2a_n} \qquad \text{ or } \qquad a_n = (b_n^2-2)/2. \tag3 $$
Verify algebraically the identity
$$ 4((x+y+z)^2-2xyz-1) = (u^2+v^2+w^2-4)^2-(uvw)^2 = \\
(u^2+v^2+w^2-4 -uvw)(u^2+v^2+w^2-4 +uvw) \\
\text{where } \qquad u^2 = 2+2x,\;\; v^2 = 2+2y,\;\; w^2 = 2+2z. \tag4 $$
Combine $(2)$ and $(3)$ where $\,y=a_n,\, v=b_n\,$ and verify that the
left factor is zero to get
$$ (b_{n+1}^2+b_n^2+b_{n-1}^2)- b_{n+1}b_n b_{n-1}-4=0. \tag5 $$
Given $\,b_n,b_{n-1},\,$ regard $(5)$ as a quadratic in $\,b_{n+1}\,$ and
notice that $\,b_{n-2}\,$ is the other root.
This is a simple example of Vieta jumping. Use Vieta's formulas to get
$$ b_{n+1} + b_{n-2} = b_n b_{n-1} \qquad \text{ and } \qquad
b_{n+1} b_{n-2} = b_n^2 + b_{n-1}^2 - 4. \tag6 $$
Rewrite the first formula to get the recursion
$$ b_{n+1} = b_n b_{n-1} - b_{n-2} \qquad \text{ while } \qquad
b_0 = 2, b_1 = b_2 = 14 \tag7 $$
which implies that $\,b_n\,$ is an integer sequence. This proves
part (a) of the question.
Define another sequence of numbers with
$$ c_n := \sqrt{2+b_n} \qquad \text{ or } \qquad b_n = c_n^2-2. \tag8 $$
A very similar argument to $(4),(5),(6),(7)$ implies the recursion
$$ c_{n+1} = c_n c_{n-1} - c_{n-2} \qquad \text{ while } \qquad
c_0 = 2, c_1 = c_2 = 4 \tag9 $$
which implies that $\,c_n\,$ is an integer sequence. This proves
part (b) of the question.
Both parts of the question are now proved but the sequences
$\;a_n,\,b_n,\,c_n\;$ remain to be identified.
Define $\,A(n) := T_n(2)\,$ where $\,T_n(x)\,$ is the
Chebyshev polynomial of the second kind.
As usual, let $\,F_n\,$ be the Fibonacci sequence.
This is a small table of sequence values:
$$\begin{array}{|c|c|c|c|c|} \hline
n & a_n & b_n & c_n & A(n) \\ \hline
0 & 1 & 2 & 2 & 1 \\ \hline
1 & 97 & 14 & 4 & 2 \\ \hline
2 & 97 & 14 & 4 & 7\\ \hline
3 & 18817 & 194 & 14 & 26\\ \hline
4 & 3650401 & 2702 & 52 & 97 \\ \hline
5 & 137379191137 & 524174 & 724 & 362 \\ \hline
\end{array}$$
Using properties of $\;F_n\;$ and $\;A(n)\;$ it can be proved that
$$ a_n = A(4F_n), \qquad b_n = 2A(2F_n), \qquad c_n = 2A(F_n). \tag{10}$$