They will burn up fast compared to chips and chunks, so putting them directly into the smoke wood tray/box will not work very well. You can use a few tricks to reduce the amount of air and heat getting to them and extend their smoke time. Start with a burned-out/seasoned tin can to put the pellets into...keep the lid, as you may need to put it over the pellets to further reduce air getting inside. If this proves to be not enough to slow down the pellets, you may need to elevate the tin can off the grate slightly...next step would be to raise the smoke wood tray a bit higher from the propane burner. It's all about finding the right balance of heat and air to get the amount of smoke and smoke time you want. Also, if you're getting too little smoke, but a good amount of smoke time between refills, then try a larger diameter can so you get more potential for smoke. Cut the top of the can down to height needed to fit between the smoke tray and water pan.
Eric