It could also have to do with the Key for those statuses. When you look at the list of statuses in Setup, if the Key for your Project status Complete is the same as the Key for your Issue status of Canceled, that would cause the resolved issue to change to Canceled when the Project is changed to Complete
I believe the Project status of Complete is a default and has the Key CPL, check to see if your Issue Status of Canceled has that same Key.