Both AES-128, AES-192 and AES-256 are supported, and you can configure your key length with the dip.properties:
Keep in mind that depending on your Java version you may need to adjust your JCE policy.
There is no mechanism to rotate the encryption key. Fundamentally, DSS needs to be able to actually send the raw password so the encryption key is stored in the DSS data directory. So if the encryption key is compromised you should assume that the attacker also had access to the encrypted 3rd party password and you should consider that those 3rd party password are also compromised.