It is not the version of Visual Studio that determines if certain functions are supported, but only the version of SQL Server and Reporting Services that is rendering the RDL file. If it is anything less than 2008 R2, Lookup() is not supported. It seems that such is the situation with your report. The key word "Lookup" would not have a wavy line under it if Reporting Services plug-in for Visual Studio was 2008 R2 or greater.

I guess you'll have to go back to pulling it in the query, which should work fine. Whenever you upgrade the SQL Server version, though, you'll have another option in your SSRS toolbelt.