Susie, it can be a bit drying to the skin; you probably wouldn’t want to use it for more than a couple weeks on a cat that’s already got dry skin problems. But it also usually won’t make such a condition any worse.
You can use it outdoors, too; the trick is, it becomes ineffective when wet. So if you sprinkle it throughout the yard, fine; but it would need to be reapplied after every rain. On my front porch, I use it on the welcome mat (where the cats like to lie) and in the cat beds, to help cut down on fleas. If I can get it on the cats, and if they’ll let me touch them, I pet them to work the powder down to the skin.
Indoors, it’s really best used on floors, carpets, under baseboards, on any upholstered furniture such as a couch, cat bed, cat castle, and so forth. And on the cats themselves, of course. I don’t worry about applying on the cat’s head; I focus on the neck and rest of the body. The fleas crawl all over the cat, so eventually they’re going to wander through territory dusted with DE, and it’ll start to work.
It requires 2 weeks to kill the flea life cycle. The house can look like it’s been lightly floured all over, but I tell ya what, I’ve seen such damage to cats from most toxin-based flea control products that I’ll gladly put up with a small bit of messiness rather than use toxic products on my cats.