Lydia can't mind-read. She can only use telepathy to talk with other people. And still, the person she's communicating with can't use telepathy. They have to actually talk.
As for mind reading, I think its ok as long as a pokemon has its health at full or close to full(as so is their powers). I always try to weaken down my characters if their low on health. It shouldn't be completely banned for psychic types...because their, well, psychic.
EDIT: If you think I'm god-modding just tell me. I'm just using the extra power Rumble gave Lydia. Otherwise she wouldn't have any power by now.