You've actually got two questions here, but that's OK

To store anything as fat you need insulin in excess. When you LC insulin is kept in check and glucagon is dominant - fat storage cannot happen.

Gluconeogenesis is the creation of glucose from protein and it happens under the influence of a few hormones, one of which is glucagon - but most importantly it happens in the complete and utter absence of insulin. It also happens all the time - it's part of your body's glucose homeostasis system. A search on this forum for Gluconeogensis will give you all the fancy details of just what happens, if you're interested.

Protein is not used as fuel - at least your body doesn't like to use it as fuel. Protein is used to build and repair tissue, to build enzymes and to build hormones. Protein is vital to your body and it is recognized as such - F.A.T. is what is used as fuel when you LC. This is why it's important to keep fat up when you LC. You're not eating carbs, protein is not being used for fuel - what does that leave you?

Cheers, Toots
Nat