If you are trying to add a site column to a list, or a content type that has a site column to a list, and get the dreaded "Cannot complete this action.", then have a read below. Note - this is valid for both sharepoint 2007 and 2010.
To troubleshoot this, I turned off the custom errors to see the entire stack trace of the error. The error was thrown by the Microsoft.SharePoint.Library.SPRequest.AddField function. This lead me to read Eric's blog post about the error and he pointed me in the right direction.
It turns out that a lookup column that allows multiple selection is not supported as an indexed column. You'd expect SharePoint to validate that, and indeed you do not get that option when configuring such a column using the user interface.
However - sharepoint does not validate that when you create the site column using CAML (which is what Eric did) or using code (which is what I did).
Eric's blog post shows how you can recreate and resolve the problem if you are creating the column using XML. So just in case you are making the same mistake I was doing, this is how I resolved my issue - I just make sure none of my code-created lookup columns is both multi select AND indexed, as you can see in the code below.
SPFieldLookup newField = web.Fields.GetFieldByInternalName(newColumnInternalName) as SPFieldLookup; newField.Title = "My Lookup"; newField.AllowMultipleValues = isMultiSelect; newField.Group = "My Site Columns";if (!isMultiSelect) newField.Indexed = true; else newField.Indexed = false;newField.LookupField = myList.Fields["Title"].InternalName; newField.Update();