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Empty Body (Su): A monk with this ki power gains the ability to assume an ethereal state for 1 minute as though using the spell etherealness, using his monk level as his caster level. Using this ability is a move action that consumes 3 points from the monk’s ki pool. This ability affects only the monk and cannot be used to make other creatures ethereal.
Can a monk using empty body deal full damage to incorporal creatures like shadows (undead incorporeal) ?
Not usually, no.
Ethereal and incorporeal are different. They are extremely similar, but nonetheless technically different. Both interact with the mundane world in much the same way—which is to say, mostly not at all. Likewise, “mundane” magic—that is, magic coming from the Material Plane—mostly works the same with both. But why ethereal and incorporeal things have those interactions is actually quite different, and that difference matters a lot when you step away from the mundane—as the monk does with empty body.
Being “ethereal” means that the creature in question is actually on the Ethereal Plane, which is a “transitive plane” that is sort of overlapping with every other plane in existence. (The Astral Plane and Plane of Shadow are likewise, though the Shadow is rarely used like this and the Astral never really is.) Usually, two things on separate planes don’t interact with one another at all, but for transitive planes, the “overlapping” means things actually can have extremely limited interaction with things on the other plane. That’s what the ethereal condition represents: the very limited interaction that someone on the Ethereal Plane can have with someone on another plane. If both creatures are on the Ethereal Plane, though, their interactions are totally normal—since they’re on the same plane. And if, for example, you were playing primarily in the Ethereal Plane, it’s the stuff on the Material Plane that would seem “ethereal” to you.
Meanwhile, being incorporeal has nothing to do with planes. Something that is incorporeal is fully within whatever plane it’s on—usually the Material—it’s just incorporeal by nature rather than ethereal by virtue of being on a separate-but-overlapping Ethereal Plane.
Which actually kind of implies that someone who is ethereal should, if anything, have a harder time interacting with something incorporeal on the Material Plane—they are separated by the planar divide as well as by their respective corporeal/incorporeal status. The rules don’t actually make it harder in any way though, which is probably fine since the interaction is already really hard to overcome and gameplay-wise it really doesn’t need to get harder.
(D&D 3.5e made this confusing situation even worse by having the ghost—one of the first monsters one thinks of when one considers incorporeal/ethereal foes—actually interact with both. Its description was actually fairly careful about describing which it was and when, but it takes fairly close reading to really get it. Pathfinder’s ghost lacks the whole manifestation business and so avoids that—nice improvement, that–but since many players and GMs are former or current 3.5e players, it may affect their [mis]understanding of how these work.)
Anyway, the long and short of it is this:
\begin{array}{l|c c c} & \textbf{Corporeal} & \textbf{Corporeal} & \textbf{Incorporeal} & \textbf{Incorporeal} \\ & \textbf{Material} & \textbf{Ethereal} & \textbf{Material} & \textbf{Ethereal} \\ \hline \textbf{Corporeal Material} & \text{Normal} & \textit{Limited} & \textit{Limited} & \textit{Limited} \\ \textbf{Corporeal Ethereal} & \textit{Limited} & \text{Normal} & \textit{Limited} & \textit{Limited} \\ \textbf{Incorporeal Material} & \textit{Limited} & \textit{Limited} & \text{Normal} & \textit{Limited} \\ \textbf{Incorporeal Ethereal} & \textit{Limited} & \textit{Limited} & \textit{Limited} & \text{Normal} \\ \end{array}
Here, “Material” basically means “not-Ethereal,” as any other plane interacts with the Ethereal in much the same way that the Material does. Also, the \$\textit{Limited}\$ interactions are not 100% exactly the same in each case, though they’re pretty similar.
