A cursory reading of the literature would suggest that American Lung Association, Natural Resource Defense Counsel, and Physicians for Social Responsibility all concurred that coal burning does impact our respiratory system.
See: http://www.lung.org/assets/documents/healthy-air/toxic-air-r...
And:
http://www.psr.org/assets/pdfs/coals-assault-chapter-3.pdf
Your second argument is a bit like saying, well we have to get nicotine from somewhere. If not smoking, what else will people do to get their fix. Are we really ready to give up our nicotine habit?
A lot of people did give up smoking once they figured out it was killing them. If people realize the same thing about coal, I suspect there will be a much faster and stricter set of regulations coming into force.
As for the problem of where to get energy, natural gas is a more efficient and cleaner burning alternative that you didn't mention. Of course if that gas is delivered via fracking there are a whole lot of other problems with ground water pollution. So the energy mix needs to change and it needs to be found in a less impactful fashion.