Though some of these types are traditionally made from bamboo, I make them out of wood. While bamboo can be very expensive, it also can split very easily due to changing climate conditions, making it a very expensive, but unplayable flute.
Wood is therefore more durable, and also much less expensive.
I make these flutes with a router, and hand tools such as drawknives, rasps, files, and gouges. I do not use a lathe. It is used in plumbing water, but outgoing water. The thing to remember is, if you sand it, melt it, or burn it, and breath in the dust and fumes, then yes, it's bad for your health. If it's finished smooth, and you're blowing out, then yes, it's safe.