I have just redeemed 100,000 of my bmi miles for outbound upper and return PE. Now on my booking, there is no mention of a seat number, and the book reference does not work with the Virgin system. So my question is, can you choose your seat on reward flights or is this only allocated at the airport
Yes you can request seats on a reward booking.
It is possible that depending on on your route and date of travel that the 60% pre request limit has been reached so you won't be able to select a seat until OLCI opens.
But more likely is that the VS system had not fully updated itself and may be waiting for the credit card charge for the VS fuel surcharge etc to clear