Definitely will post if I determine the problem. Looking at the various permissions and files I haven't come across anything.
The best workaround I can think of right now is;
1) Make a backup of cups-deamon
2) Delete everything in
/logrotate/cups-deamon so logrotate shouldn't do anything to the log files now
3) Change the MaxLogSize parameter in
/etc/cups/cupsd.conf to MaxLogSize 1048576 (ie. 1M).
4) Optionally, change LogLevel to none
This doesn't do "daily" log rotation. It should allow cups to manage it's own log files and rotate them at a set size. Changing LogLevel to none should just help reduce/remove the logging so it doesn't (accidentally) grown out of control or anything.
EDIT: I'm actually going to fire up a Ubuntu 14.04 VM that has working cups/logrotate and see if the problem exists there. If not then I'll start comparing things and see what I find. Maybe that will help.
EDIT2: logrotate works as expected in a Ubuntu 14.04 VM. So time to investigate and see what I find...