When is unsafeInterleaveIO unsafe?

Question

Unlike other unsafe* operations, the documentation for unsafeInterleaveIO is not very clear about its possible pitfalls. So exactly when is it unsafe? I would like

Answer 1

Basically everything under "Update" in the question is so confused it's not even wrong, so please try to forget it when you're trying to understand my answer.

Look at this function:

badLazyReadlines :: Handle -> IO [String]
badLazyReadlines h = do
  l <- unsafeInterleaveIO $ hGetLine h
  r <- unsafeInterleaveIO $ badLazyReadlines h
  return (l:r)

In addition to what I'm trying to illustrate: the above function also doesn't handle reaching the end of the file. But ignore that for now.

main = do
  h <- openFile "example.txt" ReadMode
  lns <- badLazyReadlines h
  putStrLn $ lns ! 4

This will print the first line of "example.txt", because the 5th element in the list is actually the first line that's read from the file.