The orange LED is normal: that indicates charging.
The issues you mention have been reported with several other chargers as well, see the accessory list: http://www.mobileread.com/forums/showthread.php?t=48256
. It seems to make the device unusable while charging, but AFAIK no other side effects have been reported. I.e. nobody knows whether this damages device or battery, but there is no direct evidence that it does.