Infestation Dangers Are Overstated
When dealing with pine trees that are suspected of infestation, the trees are cut down and the bark stripped off. The tree is then usually covered in thick plastic and left in the sun long enough for the immature larvae to be killed by the heat and their own waste products. This process is generally done before the wood is given over to lumber yards, who then treat it with varnishes, and kiln dry it to make sure it doesn't warp--and which will also remove the risk of a further outbreak of the beetles in your home or yard.
Structural Dangers Show Up After Years of Use
While the blue stain on the wood from the fungus changes the appearance of the wood, it does not alter the structural properties of the timber. If used for "rough cut" furniture, pine beetle-killed wood may have a reduced wear life compared to conventional pine furniture--it may start to crack or dry out in 10 to 15 years rather than the typical 20 years for pine as a softwood. Because of the small size of the beetles (roughly the size of a grain of rice) and the smaller size of their larvae, the holes they bore in the wood are not as extensive or as structurally damaging as termites, and the beetles don't form colonies as termites do.
Ecological Benefits Outweigh Dangers
By using furniture, siding, and trim made from pine beetle-killed trees, you are keeping that damaged wood from being burned and adding to the carbon dioxide levels of the earth's atmosphere. You are also helping fund additional research into treating pine beetle infestations, and containment programs to keep the pine beetle plague from spreading to other parts of the western United States.