How do I resolve this data source connection issue with Cognos?
What we ended up doing was rebuilding our environment since it was only "development" anyway. We installed DB2 Connect rather than the Runtime-Client so that way we could catalog the iSeries databases and the LUW databases for Cognos to use.

We also could have used a gateway pattern where we could have set up DB2 Connect as a "Gateway Server" and cataloged the iSeries databases there and then cataloged the databases from the Gateway Server on the Runtime Client. That would have gotten us around our original issue too.

Interestingly enough, we were steered away from using a Gateway Server when we rebuilt our environment. No reason why. Even though IBM supports it, they don't recommend it. Only thing I can think of is that it introduces another failure point.