I use fleece for my rabbit, partly because when I used bedding she always pushed it aside to lay on the plastic floor of her cage anyway, and it’s going well. I haven’t noticed any increase in odor and you shouldn’t either as long as your rabbits are litter trained and you still use bedding in their litter box, which if they aren’t litter trained I didn’t have a hard time training mine, I just let her choose a corner to go to the bathroom in and put a litter box there. 

I definitely wouldn’t use towels instead of fleece because my rabbit likes to chew fabric and for some reason she won’t chew fleece, but from what I’ve read, towels are more hazardous if eaten than fleece. 

Personally, I use puppy pads, fleeces and rugs on my bunnies’ flooring.

I think sawdust smells worse than fleeces, as long as the buns don’t pee on them!

I guess digging depends how much your bunny likes to dig. You could always make a separate digging box for them.

Towels, it depends on whether the bunny chews them. If they don’t chew, it’s fine.

the upper floor and ramp in my buns cage are carpeted (he doesn’t seem to dig or chew it) the bottom has a washable incontinence pad under his litter box and feed in area and then the front half is bare with a bunched up fleece baby blanket from the dollar store. his litter box has carefresh litter but im thinking of switching to wood pellets