Hilarious things you've found in RAW?

[MaxiDuRaritry]

Seems pretty obvious to me - Exhaustion effects become Fatigued effects, and, separately, Fatigued effects become "nothing at all" effects.

"Suffer no penalty at all" applies only to "just becoming fatigued" not to "becoming exhausted".

Having a character who would normally become exhausted suffer no penalty at all, would be "reducing it by two steps" not one.

But the fatigued status doesn't give you any penalties if you have it, meaning that, regardless of RAI, RAW is that exhaustion is reduced to fatigue, and fatigue doesn't affect you at all.