Invalid look-up value A look-up field contains invalid data. Please check the value and try again.

If ever been frustrated by the error "error updating item" when you using the WF and trying to update user field.
Try to use Lookup user info this way:
Lookup ID property and store to variable.

After that just assign the ID to field.

This approach works in case user already exists on the site.

Otherwise, try to use "Lookup" Account