Gretch,
I have done a number of bowls with Mahoney's walnut oil. I can't speak to the allergy aspects. With regards to washing, we have a salad bowl that we use every week that was treated with it. It's been about a year and a half since I treated it, and it is still doing well.
This was a bowl that I originally treated with a vegetable oil. Between that and the cream based dressings we use, it started getting funky. So I sanded it way down and treated it with the walnut oil, and no problems ever since. Hence I've used it on everything.
The wood tends to suck up a lot of the walnut oil. I do like to let the piece sit for a couple months so the oil can set up before I use it/wash it.