I have used DE and Sevin Dust for lice with my chickens. I used the Sevin dust the first time I found lice on my chickens. I had to redo it because I dusted to lightly because I was afraid of using too much, since it is a chemical. I have used DE ever since and found it to be just as effective, actually more, because I can use it as a preventative. I like the DE best for several reasons.
It is natural, so no chemicals.
I put it in their favorite dusting places, as a preventative, and they dust themselves!
No withdrawal time for the eggs like with the Sevin.
I also use DE in my garden, it works fine for me, I actually think it worked better than the Sevin on the potato bug larva. I also sprinkle it on the compost and anyplace there are flies breeding, because the DE kills maggots too.
I edited to add;
I know people use lime in their barns for odor. I dont know if it is a good thing to use in a coop, because it is caustic.
I use sand on the floor of my coop, and I LOVE it. As long as I scoop the droppings daily, there is no odor in my coop at all, and no bugs either. It is sooo much better than shavings.