At the hatchery in Frankfort they said the same thing about the pellet feed. Anything raised in the hatchery would eat liver.
The regs have changed on live bait, greens were always fair game, and now you can use gills under a certain size. I have seen guys noodling for them over there, but my experience with flathead is live bait, including crawlers further up the lake. There are always channels mixed in anywhere on the lake, but the flathead won't take hot dogs and that's what we use for numbers.