My guess is that your phosphate level in the tank is too low. Running pellets and cheato (or other algae) competes for the available nitrates and phosphates. I think the algae is beating the pellets (actually the bacteria) to the phosphates, so the pellets are losing out.
Here's a full explanation of biopellets...or for that fact, any of the other carbon sources (vodka, vinegar, sugar, etc) that some are using. Think of biopellets simply as bacteria food (again, just like vodka, vinegar, etc.) The bacteria begin to consume this food and then grow and divide. In the process they need nitrates and phosphates to build their new prodogy...to build new cell sturcture....things like DNA, amino acids, proteins, etc. They utilize these nitrates and phosphate at a particular ratio, (somewhere in the area of what is termed the Redfield ratio.....about 16 parts N to one part P), (And yes, I know this ratio can be debated, but it is in the ballpark.) Now here's the problem. If one of the "building blocks" is absent, the bacteria can't continue to grow and divide, so they stop or slow down their cell division. Therefore, assuming you have limited phosphate and loads of nitrate, the biopellets would not work because the bacteria don't have want they need to grow and divide. Changing to vinegar or vodka or some other "food" will not change anything if the problem is too low phosphate.
Now with biopellets, assuming your baceria is having a party and growing and dividing like crazy, the turbulance in the reactor knocks them off the pellets and they get washed out of the reactor and into your skimmer, and are now exported from your tank (along with those nasty nitrates and phosphates that they utilized while they grew and divided.)
Hope this helps.
