TLF and CMS question.

Am I right in understanding that TLF is the best way to go about this?

lists and paragraph padding you mentioned are the features only TLF can provide, rather than the classic text (textfield text). TLF is an AS3 text layout framework with support for high-quality, typographically  rich, flowable text in Flash.

PS:

Direction and BlockProgression are the formats you should set manully when you layout the languages that should be vertical or right-to-left, such as Japanese, Hebrew, Arabic.

If I use TLF to handle the formatting, what are the options for allowing the client to edit or generate the content? Do I need to build and provide them a subset of the functionality at http://labs.adobe.com/technologies/textlayout/demos/ ? Or is there something easier available?

Can you access the source code of the demo you mentioned?  The complexity of the demo is mainly about UI things, while the codes for TLF in the demo are pretty simple.
What you need is a s:RichEditableText and some buttons. Then when you press a button, you get the textflow in the RichEditableText and set its formats and re-compose.