Because Nystatin is not absorbed well in the bloodstream, eMedtv advises that it is not an effective remedy for fungal infections of the bladder, brain or bloodstream. It is approved for use in children and is often used to treat thrush and diaper rash in infants. According to eMedtv, Nystatin USP ointment and other forms of Nystatin are well tolerated, causing unwanted side effects in less than 0.1 percent of those who use it. Side effects of the ointment include eczema, itching, burning, rash and pain that occurs upon application.