"We provide a variety of DNS records including A, AAAA, CAA, CNAME, LOC, MX, PTR, SPF, TXT etc as well as web redirect and offline actions. Wildcard alias as well as individual IP address updates for aliases are also supported. "
I still have the feeling you don't fully understand how it works.
It's also a little bit confusing to have two threads on the same subject open at the same time.
At the Let's Encrypt side, there is the ACME protocol and the ACME protocol currently has three challenges, among them the dns-01 challenge type.
To complete the dns-01 challenge, a TXT resource record needs to be added to the DNS zone with a specific label (_acme-challenge). This can be done manually or automatically, where the latter is prefered.
To do item 2 automatically, the DNS provider would need to offer an API to add (and delete) the TXT resource record.
Also, for item 2 to be automatic, the used ACME client would need to be able to "speak" the API offered by the DNS provider.