Niacin shuts down lipolysis, but only temporarily. So you get a decrease in free fatty acids, and then a counter-regulatory hormonal response that results in higher free fatty acids than you started with--and yeah, if your liver's adapted to ketosis in the first place, the increase in free fatty acids can cause an increase in ketosis.
It also has the effect of forcing the liver and other tissues, while lipolysis is reduced to run through their glycogen stores etc., since free fatty acids are temporarily short.
The damaging effects of niacin on the liver have been reported with certain slow-release types of niacin. You can see how that could be a problem--shutting down lipolysis chronically, for one thing, rather than for a short period as with the more rapidly metabolized flush niacin. It's a chronic vs. acute stress thing. Your liver also has to work at removing niacin from the system, like with a toxin, this is another thing where the effect of a chronic steady release vs an acute dose could make the difference.
In the context of a high carb diet, niacin can raise fasting blood glucose. I've never caught it doing that to me on a low carb diet, though.
I had a day in November where I ate too much of a Coconut /butter/cocoa fat bomb thingy (about 2000 calories worth) in the morning, and then wasn't hungry all day, so didn't eat much else. Then in the afternoon, I took some niacin--only to get a call from a friend who was hunting in the woods, and had got his first deer, and needed help carrying it out. Took us a few hours to carry the deer out, and me with no free fatty acids to speak of.
My blood sugar ended up in the 60s for the next few days, but I felt great.