Yes it requires that the DSL mode is compatible. Also on second thought I am 99% sure you don't need a wet loop for naked dsl, but you certainly do for analog modems. Sorry for the misleading info; it has been /a while/ since I hacked on copper PSTN stuff...

You're right; don't need a wet loop for DSL. We used to back-to-back DSL modems without them all the time. At least for particular brands (which often advertised they could do this)...maybe there were some that didn't support this.

I had a guy on the team in those long ago days who figured out how to channel-bond a pile of SHDSL modems over a couple of intra-campus phone cables (much less than CAT3 conformant) to get almost 10base-T speeds over a couple of 100m. In the end, we decided the cost of running a fiber was going to be less than the cost of maintaining the DSL solution, as clever as it was, and gave the upgrade path to whatever we wanted.