Here's a page on a forum that discusses it http://www.ultimatebettas.com/index.php?showtopic=21381
Like I said before, I've never used it
Heres an excerpt:
"Melaleuca is a harsh antiseptic used to repair torn fins and aid in healing sores. Unfortunately, it is an irritant that seems to have an adverse effect on certain fish. Most fish can handle melaleuca just fine, this includes most "scaleless" fishes as well. So far, the fish that seem to have problems with melaleuca are anabantoids and pencilfish. Since it is an irritant, it is not unlike using alcohol or peroxide on a cut or a scrape. The melaleuca irritates the cells to speed the healing process. With most fish this would be fine and it wouldn't harm the fish in any way, but labyrinth breathers are different. Their labyrinth organs are sensitive to the melaleuca and with a full dose of Melafix, you can kill a betta or a gourami within a few days. The labyrinth organ is the most important organ in a betta's body, that is it's lung. Like humans, if an irritative chemical gets into our lungs, we will have adverse problems from it, possibly even death, the same goes for bettas with a dose of straight Melafix."