We have hundred's of Inventory and Assembly Items that we will need to convert some to Serialized and some to Lot Control, • Is there a way to convert Inventory and Assembly items to Serialized or Lot Numbered or we need to inactivate them and recreate them?

Only option is to recreate the items with the new Item Type (Serialized/Lotted). We'll most commonly put a 'zzz' and inactivate the old version of the item so it's clear its the legacy version. You can add a custom field on the new item to reference the old item if having the transactional history is important. Not a small task in my experience, if you have a sandbox environment it'd be good to test the process with a smaller subset prior to making this change in production (plan for open transactions, how to handle on hand balances, etc.)