This subject came to me via email yesterday. I researched it this morning and rather than writing out a long, alarming tirade, everything you'll need to know has been written up on Snopes.
Thumbnail = smells good to dogs, dogs eat what smells good, it's like eating a chocolate candy bar, NOT good for our pups
Heck, I didn't even know there was such a thing as mulch made from Cocoa shells! I currently use mulch made from recycled tires in my planting areas in Seattle. Keeps the bugs down especially with Lady spending so much time lounging in these planting areas. That is why she has the nickname of "bug-bus". Yep, she transports all sorts of creepy, crawly buglys into the house (much to the horror of her favorite biped).