I've been doing a lot of experimenting with my diet due to stomach issues. Dairy has always been problematic for me. Since I quit dairy (with the exception of a little butter every now and then and homemade yogurt), my skin has gotten much better, my digestion is better, and my allergy and sinus problems have gone away (this coming from someone who was on antibiotics routinely for sinus infections).
I don't think milk is necessarily BAD for you, but some people definitely have trouble digesting it and the modern dairy industry is pretty awful. When I buy milk for making yogurt, I buy from a small local farm and only buy non-homogenized milk. The following book may be of interest:http://www.amazon.com/Untold-Story-Milk-Pastures-Contented/dp/0967089743/ref=sr_1_1?ie=UTF8&s=books&qid=1255109480&sr=8-1
The following article details why some people believe homogenized milk is bad:http://www.authorsden.com/categories/article_top.asp?catid=16&id=18866
Makes a lot of sense to me. Every non-western trained doctor I've ever seen has urged me NOT to drink homogenized milk for the reasons stated above. Also, concerning soy (which is REALLY bad), check this out:http://www.amazon.com/Whole-Soy-Story-Americas-Favorite/dp/0967089751/ref=sr_1_1?ie=UTF8&s=books&qid=1255109658&sr=1-1
As for protein powder, have you tried hemp?http://nutiva.com/products/0_protein.php
Also, there are many protein powders out there that are milk based, but have no lactose, etc. Maybe it's just a matter of finding the right one? Personally, I'm done with processed foods, supplements, powders, etc. I'd rather spend a little extra time in the kitchen making a bigger pot of something, grilling some extra pieces of chicken and storing them in the fridge, hard boiling some eggs, etc.