How well do wood pellets compost?
Really well, and very quickly; if I were making hot compost for vegetable beds I'd kick it up by adding 1/4 chickenmanure/wood pellets, but my composter is more of a worm and sowbug farm than anything so I just use wood pellet bedding as a mulch for roses.
The downside for bedding on wood pellets (which can be either pellet stove fuel or animal bedding; I go with price since the stove fuel actually has tighter contaminent standards) is that some chickens (I'm looking at you, Sylvia) think it's food and then you're stuck with the possibility of impaction. Sand is better since if they eat it it's just more grit; If it were a perfect world or I was somewhere either decomposed granite or crushed limestone was the paving matrix of choice I'd use that. If I were young and healthy I'd just go get an occassional wheelbarrow of sand from the pit at the other end of the field west of the house, which is coarser and less likely to be clay-covered than the sack stuff at HD.