As an FYI for the community, I ran across this oddity today and wanted to share.
I had two users that had previous licenses for the Sales Insight Outlook Plug-in. When attempting to issue some limited licenses as actual Marketo users, I ran into the error "This userid is in use. Choose another email."
After contacting Support, we found that since the emails were in the database as Email Add-in users, the system could not issue the standard Marketo licenses.
To resolve the situation, you must first revoke the Sales Insight Email Add-in license.
Then, create the standard Marketo license as desired.
Then, re-issue a Sales Insight Email Add-in license to the users.
Hope this helps anyone with the same issue.