I would to visit the American grave site in Luxemburg and was wondering if using the German railpass is possible.
No. The use of the German Rail pass ends at the border. You can, however, buy point-point tickets for travel in Luxembourg.
Here's info about the cemetery, including a map showing its location near a rail line
We took a city bus out to the American Cemetary. Ask someone at the train station where to catch it.
Here is a link to my pictures of the cemetary and Luxembourg City: