They do make pellet stove boilers, see
http://www.engext.ksu.edu/biomass/_PelletCombustion.htm
for example.
A more practical homeowner approach is to keep your existing oil burner and add a pellet stove in the living room, no special chimney required, short vent through an outside wall.
We ran a pellet stove all last winter (vented up the fire place flue in our case) and thermostat controlled. We were very pleased with the even heat. The stove provided about 70% of the heat on our 2,200 sq foot house using an average of one 40lb bag per day.