Hi PG,
I use both. Only the other day I bathed one of our girlies bums and powdered her with louse powder.
It smells lovely.
I use Diatom in their house, generously applying to the bedding and in all the nooks and crannies, along with rubbing it along their perch. As I have not yet had any "crawly" problems, I guess its a good preventative measure. I am paranoid about red mite though, and in the height of last summer, sprayed the coop with anti-red mite, this year I will also use a smoke bomb (periodically). Better to be safe than sorry.
I know some people on here put it in dust baths & food- but my girls move along and find a diatom free place to bathe.
I found the puffer was excellent for spreading it up the sides of the coop, but found it extremely difficult to refil. So I now use a tub, but much prefer the puffer.
Hope this helps.