no you can use it full strength... dont put all over your face just for spot treatment... it is an antiseptic so it kills germs and it will dry out the pimple and heal it... if you tend to have oily/blemished prone skin you should try the tea tree oil skin care line from The Body Shop.
Be careful with the Pond's or Biore strips. I got broken blood vessels from them. I never had them before, used them correctly and was gentle in pulling them off. If you have sensitive skin/thin skin, etc. be very careful. My only way now is to get the broken blood vessel (which looks like a zit at the end of my nose) removed by laser which is very costly.
i haven't used tea tree oil personally but my friend started using dessert essence tea tree oil about 2 weeks ago and loves it. she said it sucks the oil right up and she has clearer skin already, she does not dilute it.