I use only food grade DE for my chickens & ducks. I have been using it for over a year & never had a problem. I sprinkle it under their bedding & in the bottom of their nest boxes, again under the bedding. I also mix it with their feed (about . We have never had any problems with mites, lice, etc. Nor have I ever had any health problems related to using the DE...with any of my birds, dogs, humans, etc. I do sprinkle it (sparingly) wherever the bird feces tend to gather overnight (like on top of & under their roosts). I had a hatching of 6 chicks this summer & they have been exposed to it without any ramifications. I have also used DE directly on my birds without any adverse reactions. We received a rooster who was infested with poultry lice/mites. After 2 'baths' in (food grade) DE, no more bugs. We eventually rehomed him due to his size...he was really damaging some of my hens!! However, we had him for a year & never witnessed any issues.
My dogs get it mixed with their feed as well. We haven't had any fleas for over a year while everyone around is having a horrible flea problem. It also prevents ticks & internal parasites.
I also have used it in my coop where my chickens/ducks do not go - my part of the coop. LOL! I have found numerous dead wasps & flies. It dehydrates insects. Hence, we use it in our garden also.
I have to order it online - shipping is ridiculous. However, the only type of DE readily available locally is non-food grade. All 3 feedmills I have been to say their dealer can't get it. So. I pay a fortune to have it shipped. I also buy at least 50 pounds at a time. I use 1/2 cup per 50# of feed - both in my birds feed & dog food. Some people say to use a pound per 50 pounds, but I have found 1/2 cup works fantastic.
Having said all that, I have asthma. I always wear a 'medical' mask when cleaning coops as the dust/dander has been known to cause asthma attacks. Blech.
I would say food grade DE is safe... But, as with all things, there are precautions that must be taken. It really is a very fine powder & I can see how it could possibly cause serious problems in birds. Their little air sacs are SO very different from mammal's lungs.
I will continue to use it as it has helped tremendously in our home. But, each person has to decide for themselves where that balance is. Oh - and I have 6 German Shorthaired Pointer's, 43 chickens, 3 Pekin ducks, 1 amazing husband & 1 teenager (God help me!). LOL!