Learn English – Is “I’m being angry” ungrammatical

This is a strange theory that is provably wrong. It is easy to trace "I am working" back to determine that it has not developed from "I am at working", and it is obvious that the rheinische Verlaufsform is different from the English Present Progressive in other ways, not just the preposition. For starters, it uses the nominalized bare infinitive, and it uses it with a definite article. So the English counterpart would really be "I am at the work", where work is a bare infinitive. Does not compute, sorry.

Edit: oh, and the German equivalent of this English -ing is actually -end. So it would have to be "ich bin arbeitend" in German, or something along those lines. Not "ich bin am Arbeiten".

I am assuming it is because "complicating" cannot be used as an adjective - it can only be used as the present progressive form of the verb "complicate."

Exactly right. The word "confusing" has the form of the present-progressive, but it can also be used as an adjective (Source: Oxford Learner's Dictionaries). This is just a fact about the specific word, so looking up in the dictionary like you did is the correct course of action here.

Because "heavy" is an adjective and "complicating" is a present participle, your sentence C) seems a bit odd to me. There's a kind of "zeugma" where you're making "is" serve two roles: as a copular verb and as an auxiliary verb. (These grammatical roles are usually differentiated; see "Is "am" in "I am right" an auxiliary verb?". But, keep in mind that some people refer to "be" as an "auxiliary verb" in all of its uses, whether or not it is "helping" a lexical verb.)

To avoid this, I would add a few more words to change the structure:

(C2) "The topic of landmines is very heavy, and it is complicating the peace talks."