Sorry, I'm not explaining this very well... Think I'm going brain dead from banging my head on my desk!
In ArcMap I can open a tool as a standalone, or in model builder and then drag and drop the arc features into the tool, navigate to its location in the directory from within the tool, or use the arc features in a tool by referencing it from the table of contents in ArcMap. Each time the arc file has worked I have not imported any of the other features from the coverage, just the arc's. Which also means I have only opened the arc features in ArcMap.
If I export a model as a script, even with ArcMap open the script fails because the 'file arc does not exist or is not supported'. I have tried loading other features from the coverage to a file geodatabase, no problem. Does it first time.
I did find that I could make a feature class within ArcCatalog and then use the Data Loader (make feature class, right click on new feature, Load Data) to import the arc features. However, I haven't found a Python function that uses the Data Load function.