If there is plenty of ventilation the pine pellets (I know which ones you are referring to as I use them for my parrot) are perfectly safe. The only way they will cause problems is if there is not proper air circulation. Did you seek vet care for the sick keets? Being up there in age there are many other illness the bird could have had that might have wound up contributing to the pets death. Have they recently been examined by an avian vet? If not I would highly recommend doing so. Yearly fecals should always be done, as well as routine blood work. It's awful hard with parakeets tho as anything stressful can kill them. Just moving them into a new cage can stress them out enough that they could die. I would be more worried about the paint used on the cabinet before you turned it into a cage. We know little birdies love to nibble on things. Just a thought.