Is Fatigue adjusted after a Rest Period? With 50% HP recovery, it would seem logical to allow at least one level of Fatigue recovery and perhaps full recovery from Exhausted with the expenditure of an AP.
(Now that the Teratologue is done, I'm going to try to answer some of these questions (and stay on top of this forum a bit more...)
Heckmac, after reading your question, I realized you are asking about the Fatigued and Exhausted conditions, not fatigue damage. Anyway, very good question. My answer is "it depends".
After a normal rest period, any ongoing spell effects - positive and negative - are dispelled. So if the fatigue or exhaustion was caused by a spell and has a finite duration (like Ray of Exhaustion), then yes, it would definitely go away.
It's a bit more tricky if the fatigue was caused by a forced march, prolonged exposure to heat, etc. By the way the rest mechanic is worded, then yes, the fatigued condition would do away: A character taking nonlethal damage from one of these sources is automatically fatigued. The fatigue condition is removed if the nonlethal damage is healed and a normal rest period heals all nonlethal damage.
However, this would not be the case for starvation of thirst since the nonlethal damage cannot be removed until the character gets food or water. The rest mechanic isn't a substitute for actual sleep either.
Now with all that in mind, use your best judgement. The rest mechanic is meant as tool for the DM just as much as the players. It allows you to control whether the players will enter the next battle at full strength or not. If the players are force marching to get somewhere in time, don't allow them a 10-minute rest, or preferably, give them in-game consequences if they do: rest and remove their fatigue conditions but the bad guy gets a head start/the hostage gets killed/more reinforcements arrive, etc, etc.