The fact that diarrhoea worsens after milk is because of deficiency of an enzyme in our intestine that is needed to digest milk. This is also known as lactose intolerance of lactose malabsorption. Curd on the other hand is pre-digested and is relatively better tolerated.
The prevalence of lactose malabsorption shows ethnic variation. In India, the prevalence has been reported to vary from 27% to 70% in different parts using different techniques. In a recent study performed at a leading centre in North India, it was concluded that 50% of the apparently healthy northern Indian adult population have lactose malabsorption (Rana et al, Indian J Gastroenterol 2004; 23:78-78).
This is the explanation of avoiding milk in diarrhoea, or symptoms of bloating or indigestion in some individuals following milk ingestion.