Can I steal from a city with a city wall?
Yes, you can steal from a player even if he has a city wall.

The rules make no mention of a city wall having any effect on stealing from a player when the robber is moved. As you said, the only thing that the walls do is increase your hand limit by 2 for how many cards you can safely hold when a 7 is rolled.

I can't say why the green city did not light up; you would probably have to check with the app's support about that. But do you have any particular reason for thinking that it has to do with the city wall? If it is a bug in the app, that bug could be any number of things, including possibly the app treating a city wall as protection from getting stolen from.