It kills and prevents bugs, yes. Many people use it for worming and have had success, although there has not been (or at least I haven't found) an actual study as to whether DE is proven to be as effective as medications or other natural wormers.
It may not stick to feed that easily, so you can use some light olive oil to help it stick.
So in summary, the benefits probably outweigh the cons. Although do keep in mind that like all other dust, it's not that great for the respiratory system. Sprinkling some around the loft and coop is fine, but I wouldn't use a whole lot at once. Maybe a sprinkle here and there after you clean the loft to help keep it dry. But not so much so where if someone moves, DE goes flying everywhere, you know? Breathing in DE is like breathing in teeny tiny razor blades. Prolonged exposure to large amounts could cause some respiratory issues.
