There are a couple of things that explain what has happened to you:
- Qantas has disabled OLCI and self-serve kiosk check in for certain destinations such as Singapore that have changed their immigration policies due to the Coronavirus outbreak (
source). This is so check-in staff can perform additional checks to prevent uplifting passengers that would otherwise be refused entry at the destination.
- At around T-24 hours flights will go under airport control. At this point the authority to change things like seats is removed from the reservations team and restricted to airport based staff. This is so the reservations team don't undo important changes made by the airport team that they may not necessarily have the full context around as they are not 'on the ground'.
- Free seat selection for international passengers booked in classes E, N, O, Q is only available during the check-in flow, not the regular seat selection flow (they are two separate things). Reservations don't have access to the check-in flow and as you don't have access to this online you are only able to access the regular seat selection which is chargeable.
Unfortunately the agent you spoke to is right. As other passengers on your flight will not have been able to check in online, many booked in E, N, O, Q fares won't have seat selected unless they have forked out the $40/seat fee. I would try get to the airport as early as possible to check-in and be assigned preferable seats, or fork out the seat selection fee if you want to be sure.