Does the use of a tool such as the Woodpecker cause any structural damage?

Not at all.

I have one but am concerned that the holes on balsa sheeting or ply will show thru the covering. Good to get some comments here......

Depends on the user....

Its quite possible to over-use the woodpecker and damage the structure of some models. You are trying to get a bunch of pinholes. I've seen people over-use it and shred the wing sheeting.

In 30 years of modeling and 20+ years using MonoKote and other heat-shrink coverings... I've found good technique of application can give a superior finish without the woodpecker to that achieved with poor technique using the woodpecker... Practice does pay off.

agree with you fh. I am using the woodpecker for "roughening" surfaces to be glued together to get better adhesion. could also put on a rotary blade and convert it to a pizza cutter.......

Use Ultracote and the Woodpecker would be unnecessary.

Dae Segal