Aluminum is only harmful to the body when it is bound/concentrated as a solid metal then?

No, pure aluminium is instantly oxidized and develop thin film of corundum that prevents oxidation, that is why we could have aluminium things.

Some compositions of aluminium could be harmful.

I’m still not understanding how they can estimate the c14 creation by measuring al26

Aluminium in substances on the surface is under influence of cosmic rays, so some creation of Al26 will happen, aluminium that is under surface is not, so Al26 will just decay. Comparing different layers of minerals containing aluminium that deposited during times you could estimate cosmic rays intensity over time.