I use chips in all my smoking. Put a layer of fine chip on the bottom of the chip pan and than a layer of bigger chips. The smaller chips get smoking fast and they get the larger ones going. I have never used pellets, I can't comment. But why would you use pellets when they are so many types of wood in chip form. They also come in so many sizes. You can buy them by the bag or in bulk. And last, do not soak your wood chips.
This is my opinion.