I've never had any problems with using learher dye, having used it on over 20 instruments so far. I always use Fiebing's Leather Dye, which is spirit based. I apply it a few times, letting the dye seep into the grain and dry, before buffing and then applying lemon oil to set the colour.
When using vinegar / steel wool, I once again let the solution seep into the grain and dry before buffing, and then applying lemon oil.