Linseed oil is fine to feed, but in this case I agree that if it's been sitting around for a long period of time, it should not be used. Raw linseed (Flax) is a fine supplement when fed either whole or freshly ground. If ground, it should be used within a few days -- for the same reason that the oil goes bad. It degenerates quickly, loses its potency and also tastes bad. Whole seed should not be soaked for any length of time, but can be boiled. The new flax harvesting processes reduce the risk for cyanogetic poisoning, so boiling is no longer necessary (this was the old fashioned way of feeding linseed, and some people still do this). Your horse will get the most nutritive value from the linseed/flax if it is freshly ground or via a commercial, stabilized product containing flax. Flax/linseed will provide essential fatty acids and some protein to the diet and is an excellent coat supplement. It is also good for the immune system and has been shown to have an anti-inflammatory effect for those horses with skin conditions or arthritis.
A serving for an average adult mini is 1 tablespoon per day of freshly ground raw flax/linseed. You can feed the oil, but it is messier and some horses will not like the taste -- however, DO NOT feed your bottle that has been sitting around a while.
Robin C