Cedar is not recommended as bedding for small mammals as well because the aromatic oils it gives off are slightly toxic. There is even suspicion on the more aromatic pine shavings too. My fish have fared quite well in the past two years with only a very breif bout of ich to speak of. To see what species I keep, check in the "enter my tank" link in my signature below. The Oto's are supposed to be particularily water quality sensitive, but they are fine.
I did, however, have to put up with a graudally diminishing state of tea coloured water for the first few months.
This could have been from:
The tannins leaching from the cedar driftwood,
Something leaching from my home made substrate (see also "Enter my tank") or
Perhaps oxides in the gravel leaching rust into the tank
I didn't know about the cedar issue when I first started fishkeeping, though. I plan on making a new planted tank in the future so I will probably do things differently next time. Is cedar harmfull for fish? It might make a good topic...