I have been using cedar chips for years without problems. The problem comes from the oil thats in the cedar dust. This "fears" come from research that was conducted on people working in mills where cedar is cut or pulped. There is, of course, a constant "dust" in the air, and prolonged __________ was proven to cause respiratory problems in humans.
The same studies show the pine dust creates the same health hazards (pine has oil in it as well).
In fact , studies on bedding material for swine and poultry pick peanut shells as the best bedding material (no health discernible health hazards and very good absorption rate).
I have never found peanut shells.
If you purchase cedar and or pine for bedding, the manufactures remove much of the dust. If your coop is well ventilated, it is my personal belief after reading the research, that cedar's insect repelling qualities make it my choice of bedding material.
This is just one persons opinion and I am insane so do with it as you will.