Actually, Access is working exactly how it's supposed to. It's telling you that you cannot use a look-up control as a data entry control at the same time. If you try, what you're doing is every time you select an entry to LOOK UP, you're (in essence) CHANGING A RECORD at the same time. If you're sitting at a new record while you're doing it, you're then CREATING a new record.
A look-up combobox is exactly that and should not double as a data entry control.
What you CAN do is in the data entry combobox, you can place an AfterUpdate event to autofill other data entry fields based on the first and last name (although, not a good idea for someone like John Smith

).