I have seen this a couple of times in the past and wonder if others have seen it specifically linked to the membership status of 'cancelled'.
When a member tries to renew a membership that has been cancelled they get the error message:'You already have a lifetime membership and cannot select a membership with a shorter term.' regardless of their initial membership type.
The work around is to manually amend the status of the membership to expired, but this is obviously not a good work flow and frustrating for both users and admin.
Also possibly related: Membership on behalf of multiple organizations error Some users get a lifetime membership message when they try to renew
