You can use External Objects in reports. If the external object is not visible under "Other Reports", raise a support ticket with Salesforce, advising that the external object is not visible for report selection.
If you have created lookup relationships and wish to include both parent and child in the report, you must create a new Report Type under Setup which describes the parent-child relationship.
Salesforce reports using External Objects have different limitations to reports using standard objects. You can read more about this in the Salesforce docs.