finally! got it working. with the solution in this post: Cant push after trying to setup large media - #11 by alecazam
In my case, config.json did exist under ~/.netlify, but it was missing a bunch of fields that were present in ~/Library/Preferences/netlify/config.json. So I replaced the ~/netlify copy with the ~/Library/Preferences/ one, and re-ran
netlify lm:setup. This time, the command ran successfully and created the .lfsconfig, finally.
all files now showing up on large media 
best,
N.