Can I say "I was seeing Lucy last Sunday"

The progressive focuses more on the duration of the event than just its occurrance. So it would be natural to use this as a frame for some other event that took place while you were seeing her. The seeing used here would probably imply a meeting of sorts, not just noticing her with your eyes.

This could also involve a sort of progressive futurate in the past. Something like:

I'm seeing the doctor Friday.

would be the same as

I have an appointment with the doctor on Friday

So in that sense we could put together a sentence like:

I was seeing Lucy last Sunday, so I went shopping for a new suit on Friday.

Notice the time of seeing Lucy is after the time of shopping for a new suit.