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Using sdelayer -o alter to drop entity types on an sde layer stored in db2 will return the error:
"Error: Underlying DBMS error (-51).
Error: Cannot Modify the Layer
Underlying DBMS error"
This is a known issue.
This issue was resolved with service pack ArcSDE 8.1.2, which can be downloaded through the link in Related Information, below: ESRI Patches and Service Packs. Click on ArcSDE and under Version 8.1.2, select ArcSDE 8.1.2 Service Pack 1. Follow download instructions.