It sounds like the book was purchased originally as a loan and then it expired or it was manually returned? If you delete the existing book in your library and then restart the process it should download normally.
This was a book downloaded from the library using Overlook. I tried deleting the book from my Nook, shutting down and restarting the Nook, requesting again from the library, and it still says that the book is already on my Nook. It will not let me overlay it either.
Try this: On windows open windows explorer and navigate to the folder My Digital Editions and if the book is there delete it then try to download from the library again. Note my library does not use overdrive so if the book is not there try to search for it in an overdrive folder.