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never tried them via the regular chip tray. i think i read somewhere that masterbuilt does not recommend them. weather they will work or not i have not a clue. i do know they work very well in the A-MAZE-N pellet trays. i have a 5x8 and that is all i use in mine. good luck..
Pellets won't work in the wood chip holder. You need to ignite them using direct heat, like a torch or a firestarter gel of some kind. You'd have to manually load the pellets into the wood chip holder since using the loader would just dump them onto the holder. I don't think the heating element would ever get hot enough to ignite them. Even if it managed to ignite a few, if you have them in a pile they'd burn in a pile (if that's how you placed them), burning too hot and out of control before they burn themselves out within 10-20 minutes. The heat and flames could also damage the heating element. And if you dump them in using the wood chip holder, they'd probably scatter too much to ignite or create any smoke.
Like jb suggested, if you want to use pellets--which is what I only use--get a 5x8 AMNPS, or even a 12" AMNTS (Tube Smoker) from A-MAZE-N. Todd's a great guy; you can email him and he'll answer all your questions. I own two AMNPS trays and I only buy my wood pellets from him.
As mentioned above, the A-Maze-N Pellet Smoker (AMNPS) is the way to go. Do as you like but if you look around the MES community here I would say 99%+ use the AMNPS and many also make a Mailbox Mod so they can then cold, warm, or hot smoke independent of the MES heating element, without adding heat to the MES for cold smokes, and being able to mess with smoke without need of opening the MES door :)