Vaalve clearances on diesels.....

I gather you have a diesel 1HZ engine?
If that is the case then yes the valve clearances are rarely (read never) checked especially at dealers.
You need a special tool to depress the buckets and lift the shims out and most places don't have them. You can do it with a couple of small screwdrivers but it is fiddly, see the Gregory's manual for details.
1HZ's do go better after the clearances have been set correctly, once done they don't seem to change much either. We monitored about 6 or 7 engines over 200k each and they rarely needed adjustment after the first one.

Valve clearance isn't usually a huge problem with the 1Hz. To do properly requires a lot of labour (fiddly). At around 200K I'd replace the water pump, thermostat and clutch as preventative maintainance. Always use Toyota coolant, anything else leads to strife I'm told. Fit a low/no water alarm, it will set your mind at rest. Those radiators don't last forever. Also have your mech check out your clutch fan and pop some grease in it, another trap for young players :) Check your steering fluid and watch for leaks; its extremely common.
You might also think about joining the 80 series online Qld mob, a great resource.
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Hi Bware,

Back to your original questions, "Do incorrect valve clearances cause damage, or just affect the running of the motor?", the answers are "yes" and "yes". The possible effects of incorrect clearances depend on whether they are too small (tight) or too large (loose). Too large is the lesser of two evils.

The whole point of having valve clearances is to ensure the valves always close tightly when not being positively opened by the camshaft. The manufacturers recommended clearances (which may be specified for either a "cold" or "warm" engine) are worked out so that, at normal operating temperature, there is still a small clearance despite all the metal components of the valve train having heated up and expanded in size slightly.

If there's no clearance, the valve may be being held slightly open when it should be closed. This is obviously not a good thing as, for a start it means compression will be lost. It's especially bad for the exhaust valves, as a non-sealing exhaust valve will overheat and be eroded, along with it's seat. And once it's badly worn, it's big $ to have the head reconditioned.

Excessive clearance is not so serious a problem but it does mean the valve gear is generally noisy and rattly and it also means the valves are never being opened as fully or for quite as long as the manufacturer intended, leading to lost performance.

I have no first hand experience with 1HZ engine but it sounds like it is a shim-and-bucket arrangement, where the clearance is adjusted by changing a hardened steel shim (probably the size of a coin) to one slightly thicker or thinner, if it is not correct. I can say that my experience with similar systems is that, like the other writers, they rarely require changing once the initial wear is taken care of. The clearances of this type of system are much less likely to change between services than the traditional 'screw and locknut' tappet arrangement.

Now, I'm sure the others will correct me if I'm wrong here but, even if a special tools is required to change any shims, it should be quite feasible to "check" the clearances and determined if any require attention with just ordinary old feeler gauges? On my now 20 year old BMW motorcycle, I used to check the clearances one evening, then if any required changing, I'd go and buy the required shim(s) the next day and change them the following evening (with the special tool, which wasn't too expensive for that engine). With a manual to give you the procedure, I'm sure most home mechanics could easily check their clearances and take the vehicle to a suitably-equipped mechanic if any need attention.
Ian