Update
Made three more attempts- got same answer that they can't do it. Got various answers like "LX does not release seats to us", "Mixing classes are not allowed on Star Alliance awards", "We can see seats, but can't price itin" etc. even though seats are available on ANA (which means it should normally be available to all Star Alliance carriers). Tried Brussels and Houston- neither could do it.
Since there is a possibility that Miles and More would release seats for a LH Gold, I decided to verify if it is true that LX will not release to CO. Just to experiment, I asked BD to do a dummy reward booking for me and it was done without any problem.