Wood stove pellets are fine as long as they don’t contain any accelerants. Since you actually got yours at a pet store, where they are intended for animal use, those would certainly be safe. Even though the pellets may be made out of pine, they are compressed and don’t contain the dangerous aromatic oils that pine and cedar shaving have.

You’ll need a depth of about a couple of inches of the litter. Or you can see if there are recommendations on the bag. Just put litter in the litter box, not in the cage. You can remove the wet litter daily. I tilt the litter box so that the dry litter goes to one end, then I scoop out the wet stuff, and add a little extra dry litter. You can scoop out some of the poop each day too. On a regular basis, once a week or so, you will need to dump out the entire contents of the litter box, and clean it out. Use a natural soap or cleanser, or you can use white vinegar. Dry it and refill with fresh litter.

In addition to tobyluv’s great advice, I just wanted to add that you don’t need to put bedding in the whole cage. In fact, this may just confuse your bunny as to where the litter box is, and complicate litter training.

Most people use pine pellets, but aspen pellets are also used for litter. In my experience since I have used both, I have found aspen to be weaker on the odor control and doesn’t break down as nicely as pine. The pellet process removes the dangerous fumes from the pine and leaves it safe for bunnies. The accelerant stuff is the wood pellets you can buy for stoves, to make it burn better, which are dangerous (though, if you can find it without, thats the cheapest way to get WSP).