I have looked at the problem that citations cannot be inserted as 1st items in footnotes once again more closely. It has become obvious for me that this is indeed a bug of org-cite or rather a default setting which was deliberately introduced, although it is not really user-friendly or practical to my mind.
I modified the function org-cite--allowed-p in oc.el and inserted 'footnote-definition' in the following lines:
;; Paragraphs and blank lines at top of document are fine.
((memq type '(nil paragraph footnote-definition)))
(I leave the comment in its original form to make the passage easier to identify.)
'footnote-definition' by the way does not appear anywhere in
org-cite--allowed-p in its current form.
After this I can easily insert footnotes as 1st items in citations, and I do not get Org's warning "Cannot insert citation here".