Although it doesn't cover sheep, you might want to read the abstracts on feeding DE in the "Orgainic Research" section on this Web site, especially the free choice feeding to dairy cows. I think I would mix it with the feed, but that may not be practical during the grazing season. An alternative on the range might be to mix it with mineral supplements in the mineral feeders (if they even use those) or possibly salt if loose salt is offered (which it probably isn't; they probably use salt blocks). I wonder how palatable dry DE is to sheep, but it probably wouldn't be fly-away dry for long if there's any ambient humidity. These Web sites list some feeding DE suggestions for sheep and other animals, and they probably coincide with Robert's suggestion:
I commend the hypothesis advanced in the Burke, E.M. abstract from Arizona State University on the rodent test study in the Organic Research section on this Web site. The surface area/enzyme binding idea is interesting. It leads me to wonder if admixing liquid supplements with DE before ingestion would increase their efficacy. I have reservations about orally ingested enzymes, but, to the extent they are effective, perhaps their efficacy could be improved this way also.