We theoretically investigate light propagation and electromagnetically induced transparency in a quasi-one-dimensional gas in which atoms interact strongly via exchange interactions. We focus on the case in which the gas is initially prepared in a many-body state that contains a single excitation and conduct a detailed study of the absorptive and dispersive properties of such a medium. This scenario is achieved in interacting gases of Rydberg atoms with two relevant S states that are coupled through exchange. Of particular interest is the case in which the medium is prepared in an entangled spin-wave state. This, in conjunction with the exchange interaction, gives rise to a nonlocal susceptibility that--in comparison to conventional Rydberg electromagnetically induced transparency--qualitatively alters the absorption and propagation of weak probe light, leading to nonlocal propagation and enhanced absorption.