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Yes, I have heard this. I stoped using the cedar in chicks that were less than 3 weeks old. This is an older pic, one of my first hatches. i have of course since learned on this site not to use cedar.
Fortunately these guys grew up to be beautiful healthy chickens. They are running the property these days.
I do buy my cedar from a company in town that has them in compressed pakages for the horses. It helps keep the stalls a little nicer. Now we use the pine shavings that are brought in the compressed packages. '
Really though, I never had a problem with the cedar with the peeps. In the nursery I use the big flaked pine shavings to discourage the peeps from eating the stuff. This I feel is more of a danger.