Yes. Channeled energy can be used to affect living creatures OR undead, but not both at once. So with this ability you heal as if you were an undead to channeled negative energy that is set to affect undead. And, assuming you're still alive, you heal from channeled positive energy set to affect living creatures, as well.
Or you can channel to harm living and not exlcude yourself, then you heal damage instead of taking damage from channeled negative energy.
Damage living, heal yourself, no healing undead.
Heal undead, heal yourself, no damage living.
It seems to me with this ability you are healed by both positive and negative energy if it is used to heal.
Cool stuff.
But dealing damage and being healed yourself should still not work.
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"you heal damage instead of taking damage from channeled negative energy"
If you (or any other negative-channelling cleric in range) channel to harm the living, you heal yourself for the same amount.
"If the channeled negative energy targets undead, you heal hit points just like undead in the area"
If you channel to heal undead, you heal yourself for the same amount.
Upper-level domain powers should be scary.
Another cleric using positive energy can also heal you.
But since we have about three readings in six posts, it seems worth a FAQ call.
This is just a case of bad prose on Paizo's part...the intended meaning is pretty clear.
When channeling energy, the choice being made isn't, "Affect living or affect undead"...the choice the channeler makes when using the ability is, "channel positive energy or channel negative energy"...which actually precludes the first interpretation, anyway.
A cleric doesn't channel to heal or damage...a cleric channels energy. The effects of that energy are wholly dependent on the properties of the beings caught within that burst when it happens. When he channels positive energy, if there are living creatures within that burst, they are healed by it. If there are also...at the very same instant...undead creatures within the area of effect, they would be damaged because it's a positive energy burst.
A cleric can totally affect living and dead creatures at the very same time with one burst...and himself, too, if he so chooses.
Here, from the PRD:
Channel Energy (Su): Regardless of alignment, any cleric can release a wave of energy by channeling the power of her faith through her holy (or unholy) symbol. This energy can be used to cause or heal damage, depending on the type of energy channeled and the creatures targeted.p
A good cleric (or one who worships a good deity) channels positive energy and can choose to deal damage to undead creatures or to heal living creatures. An evil cleric (or one who worships an evil deity) channels negative energy and can choose to deal damage to living creatures or to heal undead creatures. A neutral cleric who worships a neutral deity (or one who is not devoted to a particular deity) must choose whether she channels positive or negative energy. Once this choice is made, it cannot be reversed. This decision also determines whether the cleric casts spontaneous cure or inflict spells (see spontaneous casting).
Channeling energy causes a burst that affects all creatures of one type (either undead or living) in a 30-foot radius centered on the cleric. The amount of damage dealt or healed is equal to 1d6 points of damage plus 1d6 points of damage for every two cleric levels beyond 1st (2d6 at 3rd, 3d6 at 5th, and so on). Creatures that take damage from channeled energy receive a Will save to halve the damage. The DC of this save is equal to 10 + 1/2 the cleric's level + the cleric's Charisma modifier. Creatures healed by channeled energy cannot exceed their maximum hit point total—all excess healing is lost. A cleric may channel energy a number of times per day equal to 3 + her Charisma modifier. This is a standard action that does not provoke an attack of opportunity. A cleric can choose whether or not to include herself in this effect. A cleric must be able to present her holy symbol to use this ability.
Death's Embrace (Ex): At 8th level, you heal damage instead of taking damage from channeled negative energy. If the channeled negative energy targets undead, you heal hit points just like undead in the area
While the first line is often considered fluff text, in this case, it has a completely different effect than the second.
The second line is clear. If someone channels negative energy targeting the undead, you get healed along with the undead.
The first line has no bearing on this. Without the ability, you wouldn't have taken damage anyway. Your living buddies didn't take damage. There was no damage at all, because negative energy targeting undead only heals.
The only way for a living creature to take damage from channeled negative energy is if it's used to harm the living.
So for the first line to be even slightly relevant, it has to apply when channeling negative energy to harm the living. In which case, instead of taking damage, you get healed.
I think Starglim has it right.
Regarding rulings, I believe it says exactly what it's written. You heal yourself when you receive damage from channel negative energy.
More accurately, you heal any time negative energy is channeled (and you're in the burst, and not de-selected, etc.).
Channel negative to harm? You get healed. (sentence 1)
Channel negative to heal? You get healed. (sentence 2)
And that's why you get 4 death clerics to go around in formation channeling everything to death.
It is not fluff text, it is in fact a special case.
Also note this abilility has been covered many times in the past.
Not needing a FAQ.
In a home game change the rules to suit your needs.