First, CICS is way out of my turf...
Having mixed case in passwords for DB2 is no problem. Only upper-case characters in user-ids are not allowed by DB2. If you got it to work some time ago (I rather doubt that), then you could not rely on it because the docs state that this is not supported. Maybe you could use your own security plugin to deal with this?
I searched a bit through the CICS manuals and found this:
http://publib.boulder.ibm.com/infoce...a4/dfha4k5.htm The wording "Unless you are using the CREATE command, any lower case characters you enter are converted to upper case." for the SIGNID may suggest that you could probably slip in lower-case characters with the SIGNID. (A lot of conditionals in this sentence; I know.)
In any case, this seems to be a PMR for CICS and a PMR for DB2 LUW because the two products don't seem to work together.
p.s: As a real ugly work-around Classic Federation could be a way to go, i.e. make the data DB2 LUW database known in a DB2 z/OS database.
p.p.s: Double-quotes don't work, unfortunately - at least not with DB2 V9.5. And I agree that this is not a really smart restriction (read that as "stupid").