Yes, geographic coordinates and DEM is bad, depending upon your software of course; several Esri functions don't work properly in geographic coordinates. Your point spacing becomes tiny and so does your cell size.
I believe las2las will reproject LiDAR data based on the readme. This data is supplied in geographic coordinates possibly because it needs to cover a very large area and a projected coordinate system would not be a SRID coordinate system to cover that.
I definitely recommend projecting geographic las to projected las or tools like las2dem probably wont produce intended results, possibly due to small number rounding.
Another case to reproject LiDAR data is when you are supplied las files in different coordinate systems - pick one and project the others.
