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Since 1.10.1, the DNS config options changed a bit, and some of the old options are still mentioned in the DNS proxy config:

http://theforeman.org/manuals/1.10/index.html#4.3.5DNS

4.3.5.1 dns.yml
These are the new options and correct:

To enable the DNS module and enable a provider, dns.yml must contain:

:enabled: https
:use_provider: dns_nsupdate

And below, at the Proxy section under
4.3.5.3 GSS-TSIG DNS
the old ones are still listed:

Update the proxy DNS configuration file (/etc/foreman-proxy/settings.d/dns.yml) with the following setting:

:dns_provider: nsupdate_gss

This should be:

:use_provider: dns_nsupdate_gss