The block system on the Smiler was operational, and the fault that was reported was valid, so the sensors and PLC were correct in stopping the ride. Alas, it was a team member and an engineer that went into the PLC system and overrode the fault system, thus causing the crash. There were not false reading to ignore, no malfunctioning sensors. Just pure human error.
And all roller coasters are equipped with the ability to override the automatic operation system--it's known as maintenance mode. It allows maintenance and engineers (or in some cases upper management) to operate the ride outside of the PLC and perform tasks that would otherwise be prohibited in automatic mode--such as lowering a brake even though the train is not on all the sensors. But like you said, it is not available to the average operator. At our park, only maintenance and ride managers have keys to switch the ride into maintenance mode. Although there are some rides, such as Sky Rocket, that allow you to clear faults from the system in automatic mode, so the typical operator can clear them.
That being said, it is hard to assume what led to Lightning Rod's failure to launch. It could be as simple as a sensor not picking up on the train's position and energizing the LSM system, or a power dip, or something much more complicated in the PLC or the launch system itself. Whatever it is, the ride did as it was programmed to do and shut down in the case of a fault.