The other thing DE does (aside from dehydrating a bug) is allow fungus and bacteria to enter the bugs body through those cuts--thus causing the bug to get sick and die. There is plenty of salmonella and e. coli to go around in the gut of any animal. Also any eggs will also be lacerated and damaged. So eventually with regular treatment worms can be naturally controlled/prevented. If you have a consistent 'relapse' of internal parasites, then using a rotating schedule of commercial de-wormers should correct the problem in addition to a full 'sanitization' of the coop..
Signs of internal parasites is not limited to visual identification in feces. Many times the worms that are attached to the intestine of the animal lay their eggs in the animals feces, and the adult worms are never seen. Signs of infestation are varied, and can include.. increased appetite with no obvious weight gain, loss of weight or body mass (birds that look and feel bony), dull plumage, loss of feathers, watery stools, respiratory issues, lethargy.. Parasites on the whole can be difficult to diagnose without consulting a vet, the symptoms are very similar to, and can be confused with, other serious diseases..which is why DE makes a good preventative.
As for getting into the lungs and doing damage, if the pen has very poor air circulation and the birds are forced to walk on large amounts of it all day every day, and its everywhere it could then cause a respiratory problem. Using it as an occasional dust bath would not be harmful, and using it to feed to the birds would not be harmful either. The mucus lining in the lungs protects the membranes from damage. Small amounts are not harmful....but if you threw the poults in the bag and shook them around..then yes the DE would most likely cause damage, just because there would be so much of it.
