I want to know how I can convert a lit file into a mobi (or alternatively a searchable pdf).
I've tried the online services, and Calibre doesn't even open it.
I am using windows 7.
"LIT files contain the actual contents of the eBook and DRM (Digital Rights Management) protection...", from How-To Geek. Likely, DRM is preventing opening an unlicensed copy.
Though there are ways to defeat DRM or remove it, the legality of doing so is questionable. Do you have a right to remove DRM for your own e-books, which you've purchased? And is anyone looking at what you do? Read Adobe is Spying on Users, Collecting Data on Their eBook Libraries, for example.