Permethrin is a fairly effective insect repellant,however, some people don't want to use it because of perceived health risks. It is actually an insecticide and kills or stuns insects that come in contact with it. As you pointed out it's toxicity is very selective and it has some other properties that make it safe (if I remember this right): it tightly bonds to clothing and skin contact degrades it or reduces it's toxicity (this is why you apply it clothing). It is also the active ingredient in prescription shampoo for lice. Appling permethrin to a hat and to the shoulder and upper back area of a shirt along with using DEET I have found to be the most effective defense against biting flies and swarming knats.
For people who are concerned about health risks due to insect repellants, I would encourage them to do their own research from creditable sources and not rely on the conclusions of some websites, which seems to be based on hear say. Keep in mind that the safety of these repellants has been well demonstrated as they have been studied and restudied and have been in use by millions of people for many years. Also keep in mind the larger picture and compare the relative health risks of contracting insect born diseases such as Lyme disease.