Is it possible to exhaust DTT while shooting at squadrons?

The card does not appear to have restrictions on what you can attack with its effect.

Example: MC80 BC reveals a CF dial, no ships to attack but squads are in close range...MC80 BC rolls its 2 black die, with 1 blank, 1 hit, - I decide to add a red by exhausting DTT, it's a hit, I remove the blank black, and there's now 1 hull left on a 3-hull squad, I decide to now add CF fire dial to add a black or red? Get a hit, kill squadron.

Sure can.

Makes a nice addition to Agent Kallus and Gunnery Teams on an ISDII.

Yep. DTT is not limited to ship only attacks.

But of course, its an Exhaust, so it can only apply to a single Flak Atak! in a turn.

silly related question.... can it be applied to counter?

41 minutes ago, slasher956 said:

silly related question.... can it be applied to counter?

It works on attacks. Counter is an attack. So it does work for it.