I am thinking about getting the NEF handi-rifle and sending it in to get the muzzle loader barrel added. I was wondering if the muzzle loader they give you is considered inline, and will it be able to shoot pellets.

Yes it is an inline so it will be able to shoot pellets. Good luck if you try pellets though, I had better luck with loose powder out of all my smoke poles. I can tailor the loads better.