Why system tells me that I cannot renew the free package again?

Since thats free subscription, there’s no reason to reactivate it again, you’re just frustrating users with that.

Better option:

remove days limit on free subscription:

How can I see and test the extend renewal options?

You can test on paid subscription also, just after “Bank transfer payment”, you can with admin mark it as order completed in woocommerce dash, and will have the same effect as paid.

Here in WooCommerce you can enable bank transfer payment:

Then on checkout you just select bank transfer:

Then login with admin and mark this order as completed:

This will have the same effect as paid