Heat pump only running above 35 degrees
The Lennox XP17 series is certainly capable of operating at lower outdoor temperatures than 35F with reasonable efficiency.  The extended performance tables on these units are published by Lennox at the following url:

http://tech.lennoxintl.com/C03e7o14l/UfSSOXTazc/ehb_xp17_1512.pdf

Beginning on page 16, they list performance information for different indoor/outdoor combinations.  For most combinations, the designed performance of the unit at an outdoor air temperature of 17F is about 60% of the full rated capacity.

One likely cause of the problem you describe is that your unit is equipped with an optional outdoor thermostat kit which is set much too conservatively (Lennox Part 56A87 or similar).  This part is often used to automatically disable the outdoor unit during extremely cold temperatures and it is usually located somewhere in the control section of the outdoor condenser.