...when we put them out. Could this cause cholesterol problems for the little creature ?

Not unless your giving him o e or two a day! Can't imagaine they are great for him but probably not major issue.

Uh huh. When they keel over you can have them for dinner. Very tasty or so I'm told. Nicely fattened up too.

They are fine as long as you don't give them too many.

I've read that if you sprinkle a bit of chille powder on bird food, it doesn't harm the birds, but the squirrels don't like it !

Some bird seeds you buy actually include chillies/peppers or chilli powder to avoid squirrels eating it

doesn't affect the birds as they're not affected by capsaicin in the same way as mammals

hence why my budgie can happily stick his beak in my vindaloo repeatedly, while i'm desperately reaching for a glass of milk

You can get squirrel-proof
feeders