I'm currently using Exim with fetchmail and I'd like to use the RBL on Exim, but will it work? Do I need to configure fetchmail any particular way? As far as Exim knows, all mail is coming from 127.0.0.1. Will it check the source address against RBL? Or will it check the From: header?

It will check 127.0.0.1 (not very useful). The point of the RBL is to keep messages from black-listed hosts out of your machine. If you are using fetchmail, you receive the messages onto your machine before you approach Exim. That kind of defeats the purpose of the RBL. The right way to do this would be for the host from which you fetch your mail to do the RBL checking and insert some kind of warning header for you to test, as Exim does if you run RBL checks in warning mode.