You have mites. It's not uncommon, and nearly every flock has some degree of infestation.
Pyrethrin powder over the hen's back, and it will filter down to the chicks and take care of their problem too. It's very safe, and works faster and is longer lasting than the DE. Sevin powder works well also. The DE is great for a preventative measure, but you need to kill these little buggers fast! Otherwise, the mites will sap the strength of your babies.
You will also have to use it on the other chickens in your flock. Also clean everything, and spray a safe insecticide on your nests, roosts, cracks in the walls, floor, ceiling, etc. Good luck!
Got a newbie this AM, now they are just hatching from the daily eggs the other hens laid near her that she pulled under herself. The duck egg ended up going bad, so its removed now. So Seven peeps! I dusted carefully the whole coop on Thursday. I worked it into the back of momma hen so that most of it wouldn't fall off onto the chicks and TADA! No more infestation. I have tried every grain/ feed store for the DE. Next to try to see if they have it is the Co Op. *crosses fingers*
Babies are all still REALLY happy and calmly chatty two days later. Whew! Thank you for all the advice. I have three different hen breeds and this time around all the chicks ended up the same! Last time they were all sorts of fun colors, had 9, but 7 ended up being roosters! I will hold out hope that more are pullets this time *crosses fingers*