That is a myth; Not sure where that picked up steam, I have read it too, but it is untrue.
On top of it being untrue, it doesn't even make sense really. It would be impossible to consume DE "dry" being that it would instantly become "wet" once ingested and started moving down the intestines anyway. Mix with water is perfectly fine.
The fact that it has cleared up your skin is a great sign that it is indeed effective. As we know parasites cause many types of skin problems-- eczema, rashes, breakouts, and dermatitis just to name a few. If your skin is looking better on the outside then it is a sign that you're getting better on the inside too.
As you can tell I am a huge DE advocate. I have used up to 15-20 TBSP a day; Up to half a cup at a time with no adverse effects. As a matter of fact it was during this time that I killed the most of these monsters from hell. Just make sure to drink plenty of water and eat fiber to keep the bowels moving. Chia seeds and pumpkin seeds follow up nicely to help clean out all the dead havoc that is left after the DE.