Lou Reed is pretty widely covered in the US. He's adored by the rock generation that followed him. There are prominent covers of his, although not mainstream hits.
REM does at least 2 covers
Cowboy Junkies
Jane's Addiction
Nirvana
Nick Cave
Bowie
Joy Division
The Feelies
Yo La Tengo
Just off the top of my head.
At one point, Penn Jillette wanted to play Velvet Underground covers, so he put together a band. He convinced Lou Reed to sing for them. The ultimate frontman for a VU tribute band.
Right but as you said, those covers aren't by mainstream artists the broad public would recognize as "respectable" (with the exception of Bowie). My point was that in the UK Lou's work is revered and accepted by the mainstream in a way it isn't here.