I found this on another poultry forum which seems to cover all angles:
"Depends on the kind of lime. There are two versions:
Slaked or Hydrated lime: this is a form of lime that is extremely caustic especially when wet. That's probably the form you're thinking of and it does make a good sanitizer for stalls not being used. You have to be careful using it in the runs because you can burn your skin with it, and harm your birds too - so you'll want to get instructions for how to use it safely. This is the type of lime that kills bacteria, and it is the type of lime used in pits where animal carcasses are buried, to prevent bacterial growth and the stench it releases. It's also used in whitewash you use on cellar foundations and buildings.
Untreated limestone -- pelletized or powdered/pulverized. It's white (Sometimes you can get a grey coloured form called "Dolomite" or "Dolomitic" limestone.) and the powdered or pulverized form is a fine powder. This is the "sweetening" lime often used in the garden to raise the pH. It doesn't kill bacteria, but it is useful for drying damp spots on cement barn floors, etc. and for preventing odours. It doesn't burn and is safe to use as is. I use it for that and to mix in with shavings to keep them dry and non-smelly. Also I throw pulverized-powdered it into my chickens' dustbath because it seems to work well for cleaning their skin and removing mites."
I hope this helps!
Helena