Just to clarify, for the user to apply a digital signature before sending, is that available in Reader (i.e. no additional software required to be installed for the users)?
Yes, perferably Reader XI. You'll need to apply the Extended Reader Rights to the file, though.
Similarly for the digital signature option, would it completely flatten the file or could we still have the option of extracting the fields on our side (into our capturing system)?
It will not flatten the file. It will prevent it from being edited unless the signature is valid. I believe that you'll still be able to export the data, yes.