Update: Closed the workspace and reopened it. The reservations showing on the cydwr Pins page were no longer shown. The pins were once again green for GPIO use. So there is a bug, not that one would normally enable and disable the 32kHz crystal on a design like I did.
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This bug is reproduced and it is fixed in our future release[planned for 4.0 -May/June]. This is just a GUI error and please be assured that the pin will work as expected. As of now just ignore the error message.
Thanks for the update, might want to check if the same thing happens for the high-speed XTAL pins.