I'm not sure about why people would have said they are bad for seedlings. I've been using them for quite some time now and never had any issue with growth related to them. I like to use them because of the ease of transplant, as soon as i have roots popping through the peat pot (always happens) I just drop in dirt. No pulling a tiny rootball out or anything, giving me less chance to hurt fragile little seedlings.

I'm sure proper watering would contribute to the health of them as well. I was watering my small peat pots daily with about 50ml of water. They would be bone dry each morning, which is what I wanted. Wet/dry cycle. The peat is breathable, so it's more difficult to drown small plants as well.