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You can add it to the place where they dustbathe, or
put some in a garbage bag, insert chicken up to its neck. Then holding the bag securely around its neck shake the DE all around trhe bird. (I know I know I don't think my birds would stand for that ) The idea is to get the DE down...
Here's some info about lice and mites:
http://ohioline.osu.edu/vme-fact/0018.html
Good luck
Imp
ETA- Sorry there appears to be a problem with the osu site. Link won't take you there right now. Hopefully it will again in the future, had good info.
Little white bugs are likely feather lice...