Gosh, the last good thing that I've heard from Lou Reed
would be "Songs for Drella" (yeah, it's obvious that he
needs the help of John Cale). I remember seeing them
on some TV show at the time, and Reed was staring
at the guitar neck as they were playing some song that
was something like a G chord and a D chord alternating.
The best cover of a Lou Reed song that I can think of
would be Marisa Monte's version of "Pale Blue Eyes" from her "Rose & Charcoal" album--a disc spoiled only by a
cameo appearance by Louie, oops, I mean Laurie, Anderson.