Placing chicks on a sorptive dust, such as ADE, wouldn't be doing you, or the chicks, any favors. ADE is a desiccant that absorbs ~four times its wt. in water. As an experiment, bury one of your hands in a bag of ADE and leave it there for 5 minutes. Use a dry paint brush to remove the dust from the hand; rub your face with the `untreated' hand and then use the ADE'd hand (the treated hand will be appreciably dryer/rougher - rinse it off when finished - can result in cracking and bleeding if exposure is long enough). A `bed' of ADE would `dry out' the chicks - use enough for long enough and one could probably mummify them in the stuff. Just not good for developing respiratory systems/or any other mucus membranes.
It is one thing to use a handful of ADE mixed in with sand/wood chips to help dry out poop. But too much of a `good' thing isn't...
Insofar as feeding ADE? Developing Nations are always looking to improve on production/health of poultry by exploring inexpensive alternatives. In the following study, ADE was examined as a potential `probiotic', they had better luck with clay...
http://docsdrive.com/pdfs/ansinet/ijps/2008/862-871.pdf
ADE kills insects by aDsorption of the waxy lipid layer of the exoskeleton (think of it as slow erosion - until insect experiences a `hull breach' and it loses internal fluids and dies). ADE attaches to insects pimarily owing to static charge (why it works more effectively in dry climates). If the brooder is dry and hot, the ADE will end up `painted' on all surfaces to which it is attracted.
CALCINED (heated to melting and the resultant `glass' crushed into powder) diatomaceuos earth will kill insects by friction (cutting them to shreds), it will also do the same to human/avian air sacs/lungs. Constant exposure can result in Silicosis.
Amorphous Diatomaceous Earth is a relatively effective, relatively benign (GRAS Generally Regarded As Safe by FDA) desiccant/insecticide and is useful as an adjunct to primary bedding with adult poultry and as an addition to dirt bathing areas.