If you mean does it support DTS by does it have an internal decoder? No it does not. Unless you have a receiver which decodes DTS, you aren't going to get DTS sound from the PS2. If your receiver supports it, you don't have to worry about the player, it will pass the signal to the receiver without even knowing what signal it's passing.
I personally feel the DVD playback on the PS2 is horrible. The layer changes are less-than-desireable and the aspect ratios don't show up properly IMHO. Some other people say they notice no difference from the PS2 or a regular DVD player, but after being spoiled by a regular DVD player for nearly 2 years, I can't say I'm at all impressed with the PS2.
To address one of your other questions, does it have optical/digital output. It does have an optical out, but does NOT have a coaxial digital output. If you have an optical in free on your receiver, you can use this.
My recommendation is if you're just looking for a DVD player, buy a standalone unit, not the PS2. If you're already wanting a PS2, then it should be SUFFICIENT for the time being until you can buy a separate player.
dm