If CT-1701 fails to do damage (either dodged, insufficient accuracy or insufficient damage vs blocks), can he still use Covering Fire to give a friendly figure (or himself) a Block token?

Yes you can. Covering fire doesn't explicitly say that you have to deal damage.

Blast, Cleave, and Condition Keywords, and only Blast, Cleave, and Condition keywords require that the target suffers damage from the attack to be performed or give the corresponding condition.

Gaining power tokens is neither, so yes, Covering Fire can apply -1dmg (and grant a block power token) even when the attack misses or all damage gets blocked.

(And CT-1701 is also a friendly figure within 3 spaces of the target space when he attacks a target within 3 spaces.)