I too have limited experience with the commander but I have one. I got it mainly for HO (I picked up an HO PS3 NKP Berkshire through my dealer). I also picked up 2 used MTH PS3 S gauge F units that can be controlled by it.
#1 the unit just seems to run slower compared to the remote or app as far as menus and functions. Just the speed of the firmware and microprocessor.
#2 yes it outputs DC to the track even with AC input. #3 Does not have 100% all the features found in DCS remotes or the app with the "upgrade". Things like Lashup, whistle steam, quilling whistle? Again, I know there are features missing but unsure of the list of exactly what that is
#3 Since the unit is really sort of designed around HO and DC, while it's possible to run O scale with it, I honestly would not consider it my first choice. There are limits of the power supply section, I'm sure it has TVS diodes that can be blown (pretty sure I helped with at least one repair of these in the power section).
#4 PS2 engines are DCS signal polarity sensitive. So your failure on adding PS2 engines simply could be track to commander polarity. PS3 does not care about polarity- and hence one answer why they added and PS2 did not.
#4 Yes, there should be a reset, think of this kind of similar to the DCS remote, it stores the database of all engines. Admittedly, I'll have to look this up or play with this to give you a better answer.
#5 Just like any of the DCS units, the construction of the DCS transmitter section uses the ACT244 driver, and I would imagine they too can get damaged with abuse and output lower and lower signal levels.