>Can anyone explain how the capacitance level switch is operating.<
No, because you haven't told us which brand/model it is.
>Can I connect it using the AS interface or the PA?<
I've run into some capacitance switches with solid state, active voltage output; others with dry contact relay output, and even one model that switches 2 wire 4-20mA from 4mA as a 'low state' output to 20mA for 'high state' output.
I haven't used ASI so I don't know compatabilties of any of those outputs to ASI.
Thank you David for your input, but the model I am referring to is the three wire also 4-20ma which I supposed to connect it to the ASI module. One wire is the supply, the second wire is the neutral and the third is the ground.