DE works great but its not a miracle. Your not going to get rid of a lice or mite problem with it unless you also stop the source of them. DE does a great job of killing insects, and I use it frequently with great results. I use it in my garden, on ny chickens, and dog, nest boxes, and mixed with the sand on the coop floor. I have zero issues with insects of any sort in my chicken coop or on my birds or dog.
I think people dust an area or a bird, and then keep seeing pests and so they say it doesnt work. Well if they are still coming in from somewhere they arnt going to go away by just using a magic dust.
IMO if you have a sand coop your chances are good of DE controling pests. If your using deep litter or straw or shavings etc your chances are much slimmer. Especially so with deep litter. Other methods will be required for sure.
The deep litter, shavings, and straw all provide tons of nooks and crannies for them to hide, lay eggs etc. getting enough DE mixed in in those circumstances in nearing on the edge of impossible.