My choice of bedding is wood stove/horse stove/or a pellet based cat litter.
I find what works best for YOUNG rabbits is to line their cage with your bedding of choice, and then encourage (via placing hay in the corner that you want bunny to use) bunny to use ONE corner to do his business in. Once bunny is using the corner then remove some of the dirty bedding, place it in the litter box and voila bunny should be using the litter box. Usually takes about a week for a young bunny.
With an adult bunny the training is usually quicker and easier. :)
Do note: the some bunnies are harder to train than others. Then I recommend you place the litter box where the bunny has chosen as his spot. Bunnies, unlike cats, choose where they want to do their business.
Here are some videos you may find helpful.