The exemption
The key word is wholly. A pallet with a plywood deck but solid-wood blocks is not wholly processed wood, so it needs treatment and the mark like any other wooden pallet.
Moulded and composite blocks
Some pallets use blocks pressed from wood chips. Those blocks are processed wood. Whether the pallet as a whole is exempt depends on whether any solid-wood parts remain.
In repairs
ISPM 15 lets repairers use processed wood, as well as treated wood, to repair marked wood packaging. On an EPAL pallet, though, repairs must match the EPAL specification, which defines the material for each component.
Other exemptions
The same section exempts wood 6 mm thick or less, wine and spirit barrels heated in manufacture, some gift boxes, sawdust, shavings and wood wool, and wood permanently fixed to vehicles and containers.