We got this strange issue when trying to update the current item through workflow.
Since the workflow error states that it requires different type of information, we thought it was the issue with data type mismatch but it was not the data type issue.
This issue is because the list workflow is configured to run in both cases:
a. When Item is Created
b. When Item is Modified
Hence, whenever the workflow tries to update the current item, a new workflow instance tries to start but since the current workflow instance is not yet completed, SharePoint flags this type of error.
Work Around: To resolve this issue, we have configured the list to start only when a new item is created.
We now used Event Receivers to trigger the workflow when the item is updated. In this case, the current workflow stops before a new workflow starts. Problem Solved :)