I deliberated on this a while ago and ran a test. The conclusion was pitching pellets whole is the best way to go.
This does require a bit more patience for settling and cold crashing to reduce sediment prior to kegging. I like to remove the variable of hop socks and the flavour/oxidation variability it can bring.
Below is a summary of the test:
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
I have almost concluded hop bags are a waste of time, the "best bits" seem stuck in the bag once I have kegged and the goodness is there once squeezed so I might as well pitch and let gravity take care of the rest.
I've decided to run a test comparing solubility of pellet vs ground hops. I've added 1g of pellets to 70ml of water and 1g of crushed pellets to 70ml of water. I'll monitor over a few days to see how much aroma appears to come from both and how well they dissolve and settle.
Findings
So the verdict? I have attached before and after. The before shows that the hop pellets fell to the bottom of the glass while the ground pellets clouded the water.
Testing the aroma a few days on, I was surprised that the appearance ended up very similar. The aroma's were also different. The pellet hops had a gentler aroma, the ground hops were a little acrid, almost as if undesirable oils were released in the process.
Of course, dropping pellets into the fermenter has its own complexities.
But considering the evidence - I can't see any benefit from hop bags or grinding.