Home made coop
I would not insulate the pallets for two main reasons.
1. It would be a great place for bugs that you do NOT want to hide.
2. It would hold moisture in the rainy or snowy season.
What size of coop are you looking to make? Raised or on the ground?
You can put plywood on top of the pallets and paint it with porch and floor paint. Mine is holding up well with the porch and floor paint.
Craigslist is a great place to find odds and ends that would otherwise end up in the landfill.