I've haven't experienced any problems, the DE is food grade & my "Chicken House" is open so there's alot of ventilation. I only have 4 pullets so dusting with Poultry Dust (permethrin) is easy enough. I "sprinkle" with a old garlic salt container, don't douse but IF I ever have a mite/lice problem I've read that peremethrin or pyrethrin spray works. Some, I've read, spray a mist in their coop (at night) when the chickens are on their roosts, spraying chickens & getting the whole coop. Got alot of wild birds too, I sprinkle around the Chicken House area, my brother mixes some with water & spray around his house/plants for bugs (shaking the tank frequently). Leaves a white reside but he swears by it. I sprinkle the perimeter of my house at the base, Hubby hated cause it was white but don't complain now, very if no bug in the house issues.
You could use a mask when dusting, I know some don't like it but "if it ain't broke, don't fix it". I guess alot depends on your set up, I live in Hawaii so my Chicken House is open & I have shower curtains hanging for when it does rain. So my chickens have alot of ventilation. My nest box, is a huge plastic dog house with pine shavings (DE in that too), all works for me.
FORGOT to mention, DE in their dust bath helps too with wood ash from what I've read, unfortunately I don't have any
Others should be peeping their advice....