"Credere A qualcuno" -> "Credere a lui" = "Credergli" (To believe him) FAQ #11 on pronouns http://duolingo.com/#/comment/233855
Unfortunately, you have to learn which verbs uses which prepositions, that's a pain in the neck for every language.
"A lui" = "Gli"
Here "lo" can only imply "it". It is not who you believe in, which would require "a" preposition (and the "particella pronominale" would change accordingly, "a lui" = "gli", as already written).
Now I am tired and cannot find any good resource on the net, sorry. Please ask again when you have doubts and I will try to reply in a clearer way.
In italiano non usiamo MAI (ma proprio mai mai) "non lo posso credere": diciamo "NON CI POSSO CREDERE", che è l'abbreviazione di "non posso credere a ciò".
We never say in italian (never never!!!) "non lo posso credere"; we use "non ci posso credere" instead, that means "I can't believe this"
Actually I don't know the reason, I'm not a grammar teacher, I just know I'm Italian and if you tell me "Non lo posso credere" I think you're talking weird or even uncorrectly. To the utmost, you can say "Non posso crederlo", but "Non posso crederci"/"Non ci posso credere" would be better.
No particular reason. Duo is not a person. It rejects a potentially correct answer because it has not been included in its database. Just report it and give your reasoning for the reported answer. Whether it will be accepted is up to the discretion of the course coordinators.