Arduino PWM for TTL drivers

I want to fade a laser (both red and bluray) using PWM from ATMega8 or 168 with Arduino bootloader. I am looking at the O-like/Aixiz TTL driver, they say it accepts 5V on 0V off at up to 5 kHz. ATMega outputs PWM (basically a square wave like TTL), at 490 Hz. It should work together, am I right? I could also use a DAC and Eudaimonium's analog driver. How good would that be?

It should work.
But remember: You just can't feed the driver directly with the digital pins.
You have to use a transistor as a switch. If you don't use it, you will fry the arduino.
And also don't feed the transistor with the 5V output of the arduino, use a external supply for not frying the regultaor of the arduino.

It's not a real Arduino, just an ATMega8 with the bootloader. The driver has a input for the actual power, and a input for the modulation. As said, the whole thing is going to be on a external 5V regulator. Any NPN will do, right?

Any BJT will work fine.

But if is a direct 5V TTL input you can conect the arduino directly to the TTL input.
Maybe you should put a resistor, but I'm not sure, that depends on the driver.