I wouldn't use timeout if genuinely distressed and 'beside himself' that will be counterproductive. that's best used if behaviour is more wilful. also your DS is young still, my DS is 2.6 and personally i think he is a bit young at the mo' for time out, however short.
if you think the behaviour is more genuine panic / upset then perhaps some of the following might help -
keep a diary to work out when meltdowns happen and also any near misses. analyse it when you're feeling calm.
follow coppertops advice on reducing sensory stimulation. try to work out which senses bright lights, certain sounds, smells, touch (for some children it can be labels in clothing etc) your DS is sensitive to and try to reduce them
is there a comfort item that reassures DS when he is about to wobble that he may like to hold, finger etc, perhaps he could take it to difficult places
the thing about other children's emotions is interesting. given that your DS is so verbal, perhaps you could talk through with him a little, at a basic level about emotion. show him pictures in books of other people being / looking happy and sad, perhaps simple reasons why people are happy or sad, and that sadness does not usually last all the time. comment on your own emotoins as you go about your daily life, e.g. mummy is happy because you tidied up, mummy is sad because daddy has to work late or whatever seems to fit
it's difficult adjusting to the world as a two year old, so bear in mind that this hopefully won't last for ever. Do the best you can and don't blame yourself if incidents occur.