Some of the large CHC we use here for the Cattleyas still have pieces of outer shell attached, so I would imagine the same rules would apply. People have reported that the tannins in coconut can be detrimental to seedlings and young plants, and, of course, there's the salt issue. I would just make sure that what you're going to use hasn't been "washed" in sea water. And, like you said, definitely soak and rinse, soak and rinse in fresh water for several days before you use it. It should make a fine alternative to bark, I would think, especially for plants that need some moisture retention.