I've used it and it works great, but you have to remember to carry official picture ID with you when you travel. If you don't, it's just a piece of paper to them.
As far as 1st and 2nd class go, they vary wildly from train to train. Going 1st class doesn't guarantee you a luxurious experience, but you are likely to travel with less of a crowd.
They could vary - EuroCity should have a nice 1st class, but then again its 2nd class is usually OK too. I haven't heard of PDS trains, and it could make a big difference (for instance, TLK (i.e. Cheap Rail Lines - no, I'm serious) can be pretty shabby.