Re: Why is iodine vapour harmful to the human body?

Iodine vapor is toxic if inhaled. The crystals are easily sublimed into a 
violet vapor when heated. Iodine vapor has a pungent odor, is poisonous and 
is intensely irritating to the eyes, nose and throat.

For the specifics of why iodine vapor is toxic (mechanisms of toxicity), I 
suggest that you obtain the following reference via interlibrary loan (or 
through the journal if you have it available in your library).

Amdur M.O., The Journal of Toxicology and Environmental Health 1978 
Jul;4(4):619-30

Here's the abstract from MEDLINE

Respiratory function measurements in guinea pigs were used to evaluate the 
irritant response to 1-h exposures to iodine vapor and the effect of 10 
mg/m(3) submicrometer sodium chloride aerosol on this response. Iodine 
alone at 0.5 ppm produced no detectable response.  Concentrations of 3-4 
ppm increased resistance and decreased frequency and minute volume. The 
response appeared to be upper respiratory. At 7 ppm there was also a 
decrease in compliance, suggesting pulmonary effects. The response was 
potentiated by the sodium chloride aerosol. Increased resistance and 
decreased compliance and frequency were observed at 0.4 ppm. The changes at 
concentrations of 1-2 ppm were greater when the aerosol was present and 
included a decrease in compliance. The comparative effects of the sodium 
chloride aerosol on iodine, sulfur dioxide, and formaldehyde are discussed.

It sounds from the abstract that the iodine vapor induced 
bronchoconstriction (reduction of respiratory compliance), so it may effect 
the epithelia of the lung - it also suggests that the introduction of NaCl 
aerosols increases iodine vapor's ability to penetrate cellular walls 
(evidence bythe increase in toxicity.

The only other literature I found was regarding oral intake of excess 
iodine effecting endocrine function.