Question on zero clearance pellet install

I currently have a zero clearance propane insert (ventless). I haven't used it much due to propane is just as expensive as electric but when I have it will heat the entire house if I put some effort into moving the heat around. Behind the insert is just building material. I went to a regency dealer to discuss an install and he told me I would have to rebuild the entire fire place and install a free standing stove. I was under the understanding that i could rip out the current insert and install a pellet insert with direct vent. Most manufactures offere a zero clearance "shroud" or some could be installed as a zero clearance if installed with proper clearances to combustibles, but maybe I am not understanding "zero clearance" . The insert opening is 32"t x 30"w x 20"D. So my main question is can I install a pellet insert. I do have another room that I can install a free standing stove with direct vent but the wife isn't buying into that idea. I have included 2 pics of my current set up. Sorry can't get the second pic to rotate when uploaded. Any info would help. Thanks.

House is roughly 2800 sq ft. All electric. 2 story with master on the main floor. I could heat the house the the propane heater alone with some work but propane is too expensive. Just bought the house 4 months ago. Electric bill has been around $320 for the past 2 months but rates set to go up 17% in May. I plan on running natural gas to the house in the future.

Thanks Tim. I should be able to put a small vertical rise if I install an insert at that location.