FAILED ON START (retrying) Workflow resolution might be easier than you think

When you click on FAILED ON START (retrying), it gives you a page which says "Error updating list item" and the outcome column gives "Unknown Error"

I noticed that the workflow (built using SPD 2007) wasn’t able to create a task for a SharePoint User and hence was failing with this error.

Looking into the SharePoint Logs (Workflow Infrastructure category) this is what I got:

Error in commiting pending workflow batch items: Microsoft.SharePoint.SPException: Invalid look-up value  A look-up field contains invalid data. Please check the value and try again. ---> System.Runtime.InteropServices.COMException 

• I first check if this user had access to SharePoint Site. Positive.
• I then checked if the User had a valid SharePoint User Profile. Positive.

However when I tried to create a new user profile for this user, it wasn't able to find as shown below.

Just for the sake of testing I tried to use another valid user account (account_b) to assign the task to him (via the workflow). This user had access on the SharePoint site and also had a valid SharePoint User Profile. In addition to that, when I inserted (account_b) user into the Account Name above, it resolved to an Active Directory account successfully.

And to my surprise, the workflow ran successfully and was able to create the task. Now the workflow state is "In Progress"

Though this resolved the issue something still boggling my mind.

1. This user alalik (as in the above image) was already available in SharePoint User Profile and also had access to the SharePoint Site.
2. When I manually created the task for this user alalik (as in the above image), SharePoint successfully created it.

Why then did it not create the task via the SPD workflow?

Questions still prevails, but thankfully resolution was permanent. I would appreciate if someone can answer this in the comments below and I hope this helps many out there.