This is a known limitation of the phones under CCM 3.X. I heard somewhere that it was going to be fixed in 4.0, but I haven't check.
The problem is that each line ona phone can only support 2 calls at a time. When you are on a call, and put it on hold to answer a second call on that line appearance, both lines are full. When you hit transfer, the phone tries to open another call *on that line appearance* and can't. The transfer option isn't smart enough to attempt the call on a different line appearance on the phone.
There is a work around. On most phones we deploy, we assign a extension in our main partition, and that same number in our "line-2" partition. Then we configure the CallForwardBusy option on line 1 to forward to the same extension, with our "line-2-css" which will route the call to the second line appearance. That way, the second inbound call will not take that second spot on the first line appearance.
On some busy phones we have had to configure 3 or 4 backup line appearances, with their own partitions and calling search spaces.
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