I didn't find much documentation either, but I can answer your two questions:
-yes, AMO 4.2 and later supports dynamic, cascading prompts (in all the supported Office apps - Excel, Word, PowerPoint, and Outlook (in 4.3))
-yes, in AMO 4.2 and later, you can change filters in a PivotTable (whose source data is accessed via a workspace server -- ex. library data set, SAS Folders data set, Information Map) after it has been created
Note: You can't filter, subset, or sort the source data to PivotTables that use a local data set or OLAP cube as the source data, since these sources don't come from a workspace server from which we can do sql processing to subset, filter, and sort; the PivotTable retrieves the data from these sources directly.