I prefer the plastic pallets but metal or wooden pallets would work.My order of preference is: plastic - metal - wooden
Pallets dont qualify under the building code. They are not made in a manner that makes them structurally safe. Most likely they are not treated in order to keep the cost down. They dont have finished surfaces and can cause splinters.
Many are treated with harmful chemicals. I used one to build my couch though, and figure if I'm not eating off it, I'll be fine haha. Anyway, pallets have made their statement in 3rd world countries as emergency or alternative shelter. I would say yes. May I also recommend shipping containers for your project. I'm using those for my project right now and they are relatively inexpensive, recycled, durable, etc.
Yes they can be, and some houses have been built with them. NOT ALL pallets are 48 inches. In some cases they ARE treated with various chemicals that can be hazardous, usually for weather protection or with fire retardants.