The sludge mechanic simply doesn't make sense. Why is a Harvester building up "sludge" while it harvest my wheat, trees and cotton? And then to make the Sludge Boiler cause harm to the player if you come close while it's operating... well that just adds to the silliness of it all. But I guess I take this game too seriously sometimes, so maybe it's my own problem and not the mod's problem. LOL
The one time I did go ahead and "do things the right way" and made a Sludge processing setup, I found the rate of dirt and clay I was getting out of it was so low that I've never bothered with it from that point forward. I was getting something like 4 clay per hour out of the thing.
Well when you mechanically harvests anything in RL you cannot avoid getting dirt, grime, sap and other unwanted stuff with it as well. This builds up and often you are reluctant to return this to the fields due to disease concerns(these were either part of or very close to the plant. If any plants had any diseases you really don't want to return that to some new random place on the field).
Often you can reuse this waste product if you treat it correctly(for example harvesting potatoes results in a mix of fine dirt and plant bits. You pile this up and "quarantine" it for some years and then it is excellent fertile dirt). But to avoid having a ton of different solutions for each kind of crop it makes sense to just make one "sludge" mechanic.
And as to the Sludge boilers being toxic? Well if you have a mix of dirt and organic parts which you "boil" to separate out dirt, sand and clay, you might expect getting all kinds of toxic vapours. First of all there is always a trace of heavy metals in all things, then there is all kinds of nasty things produced if you break apart organic matter but doesn't completely burn it down(SOX, NOX groups for example. These are for example produced a lot if you burn wood but doesn't burn off all of the gasses. And in the atmosphere these groups then create what is commonly known as acid rain).
All in all I find the science behind the Sludge mechanics pretty solid tbh. (within MC limitations)