I had the PS2 system here for a while doing a review for a now defunct magazine. The TIU at that time accepted either AC or DC, and I have the capability of testing both. Either worked just fine.
Without the TIU, a PS2 locomotive works just fine on straight DC, but all you get is chuff out of the sound system.
There is absolutely nothing inherent in 2-rail that keeps you from using AC if you want. For some reason there has always been a tendency to think that AC works with 3 rail and DC with 2 rail. The power source has no idea how many rails you have.
I have zero experience with PS3. I doubt they downgraded its capabilities.