I've been researching this subject too and as far as I can tell, the hazards associated with DE depend on its contents. Some industrial products, including those sold for filtering swimming pools, are heated, which crystallizes the silica, making it extremely hazardous: it causes silicosis when inhaled. Amorphous silica doesn't seem to cause long-term damage. Food grade DE is supposed to have very low amounts of crystalline silica.
I'm sending this info off to a biochemist for an opinion. If anyone is still interested, I'll let you know what I hear back.