Iodine-131 half-life and reality

The Iodine-131 undergoes beta decay. This is what makes it radioactive. The faster it decays the more radiation it gives off per unit time. Yes the material disappears faster than something with a longer half-life, but its speed of decay means that it is hotter.

Iodine-131 decays with a half-life of 8.02 days into stable xenon-131 which is not considered carcinogenic. Xenon certainly does not belong in your body, but the amount produced would be chemically insignificant. Iodine has a biological half-life of 100 days in the body so any iodine-131 will probably decay before being excreted. So the answer is YES to both questions, because the radiation is much more dangerous than the presence of xenon and this risk is incurred at the time of decay.

EDIT: The above answer assumes iodine-131 has been consumed and some time has passed, and it is incorrect unless there is some way of removing the radioactive iodine (KI therapy?). The implication is that such treatment should be started as soon as possible, but it may not be worth the cost if months have already passed. Without this possibility, the risk is incurred at the time of ingestion and the answer to the question of health risk is NO. The above answer is also incorrect if we allow for other possibilities (e.g. a cure for cancer). If as Henry suggests in the comments we have a glass of water contaminated with iodine-131, and we keep it stored in the fridge for 90 days, then more than 99.9% of the isotope will have decayed to stable and harmless xenon. But I would drink it only if there was no doubt that it was free of other radioactive or poisonous chemicals (such as caesium-137).

I131 is a gamma and beta emitting isotope. As such, the beta emission is the destructive component. Beta emission is an electron ejected from the nucleus and is ionizing. This aspect makes beta electrons very destructive to thyroid tissue which concentrates iodine ~200 times more than any tissue in order to make thyroxine, an endocrine hormone which regulates the rate of metabolic processes. The important consideration is absorbed dose. This is the total dose absorbed while the I131 is present. So, the health risk is not 1/2 as much in one half life because the dose is internal and 1st half has already been absorbed.