1. Dynamic providers basically become part of Pulumi's lifecycle and will follow the create/replace/update/delete model. If you're willing to put the work in, they can do pretty much anything assuming you're willing to build the logic. If you take a look at the provisioners example above, you can see an example of that
2. Pulumi can provision anything that has an API. There are lots of tools that can bootstrap a cluster, for example our RKE provider:
https://www.pulumi.com/docs/reference/pkg/rke/
but we don't currently have any plans to change our provisioning model outside the API layer