I spray it on the areas of netting that open near the zipper door where they might crawl through (as well as areas of the bivy they are likely to get access to). As to whether it kills them on contact, I have not tested it on ticks, but a short while after I treated my clothes, an ant crawled across about 10-12 inches of material, got what appeared to be confused, and looked like he was about to die.
One issue with deer ticks (the primary source of Lyme disease) is that they are really small, much smaller than the "regular" tick, and thus really hard to see unless you are carefully studying an area trying to find them. They also drop from low trees and hang out in tall brush,trying to grab on to warm bodies as they pass by. Thus, treating only socks and gaiters may not be enough.
In terms of toxcicity vs presumed benefit, that would be a judgement call of the individual. Having known someone with advanced Lyme disease, I choose the permethrin.