The difference between distributed and traditional I/O is it the name, its distributed. You would use distributed I/O when you want more than 1 point where are all the wires are going to.
Traditional I/O has all of the wires going to 1 point, the MCC (main control cabinet). With distributed I/O you would spread this by having additional smaller cabinets with its own I/O.
The function of failsave I/O in a ET200s is to use it in concjuction with a saftey plc. With a safety cpu and saftey IO you can wire E-Stops directly to the remote I/O stations.
Yes you can use a ET200S as a remote I/O station, you could use a IM151-3pn for this. If you want safety in this station you need a HF (high feature) version of this interface module