Converting Inventory Items to Lot Numbered Inventory Items is not yet possible in the system. The ability to change Item Type (except non-inventory->inventory, which is now supported) is logged in Enhancement # 88100.
We may need to make the inventory item inactive and then create the lot numbered inventory item. Keep in mind that any historical data will be tied to the original item. Also,usually, we add an X in front of the original item so that it stands out as something we consider obsolete.