Karela is quite bitter and eaten in small quantities, generally. But I love it and often eat it in decent amount :).
I have never heard of it being injurious to health. In fact, it is used a lot in Ayurvedic medicine. It is good for diabetics, a fact that you have reminded me of. I must eat it more regularly ;)!
The spices and ingredients that are added to it during cooking, are there to reduce the bitterness and they succeed, if used correctly. I have a few recipes on this website, why not try them one by one? My current favourites are;
Karela with Imli and Stuffed . There are several other recipes here.
The seeds are only covered in a red, slimy covering, when it gets too mature/old, the seed stage. Seeds become tough and inedible anyway, so have to be removed and thrown away. Most Indians would not eat karelas at that stage, because it isn't tasty. Mind you, you wouldn't eat most vegetables at seed stage anyway, would you?
I must say that I did not know about this side effects, thank you for alerting me. May be that is why no one amongst Indians eats karelas that are too old/mature.