You have to be careful here; you're poking at some advanced mathematics. Before delving into the discussion at hand, concerning your "infinity in [its] own dimension" remark, have a look at this. Now, onto why $\frac{1}{0}$ is (for the most part) problematic. We shall begin with a brief discussion of the concept of number and division.
We may only consider the concept of a non-negative integer, as the rest follows :) While there are a number of good, and technical, definitions of this type of mathematical object, it will suffice for us to interpret it as a set of sets. So, for example we may say $0 = \varnothing = \{\}, 1 = \{0\} = \{\{\}\},$ $2 = \{0, 1\} = \{\{\},\{\{\}\}\},$ and so on (Reference: Advanced Calculus, Shlomo Sternberg). Now, we may conveniently define $\mathbb{Z}^*$ (the set of non-negative integers) to be the set containing all objects describable in the form "$\{\{\}_1,\{\{\}\}_2,..., \{...\{\}...\}_{n - 1}\}$", where $n \in \mathbb{Z}^+$ and the indices have only been shown for convenience. Notice, that this disallows the number "$\infty$", since "$\infty$" is defined as (for our purposes) the object such that no number is greater than or equal to it. Indeed, this is problematic given our current framework, hence the link at the beginning. Anywho, we can now also define the binary operators "$+$", "$-$", "$\div$", and "$\times$". I'll leave the details to you, and only focus on "$\div$".
$$
\mathbf{\tag{1} Def:}\ \forall x, y \in \mathbb{Z}, \ {x} \div {y} = \frac{x}{y} = r \in \mathbb{Z}^* : (r \times y = x ) \iff (x \div y = r : y \text{ can be subtracted } r \text{ times from } x) \text{ (i.e., } x - r \times y = 0).
$$
Certainly, $x \geq y$ and $y \neq 0$ or $x < y$ and $x,\ y \neq 0$ is a necessary condition for $x \div y$ to be defined. As a corollary to what we have covered so far, $\forall x \in \mathbb{Z}^*,\ x \div 0$ is undefined, for there is simply no integer, $r$, such that $r \times 0 = x$ if $x > 0$; if $x = 0$, $x \div 0$ is still undefined, though, for a subtly different reason which I'll allow you the pleasure of working out for yourself.
The fact that "$\lim_{x \rightarrow \infty} x^{-1} = \pm \infty$" is merely a subtlety of the real number system, the notion of limit, and mathematicians rejecting the idea of defining infinity with coarse machinery.