Is it possible to pay with a american express gift card on paypal?

Yes,just set it up as your credit card.
I don't quite remember what I did when I had one but its very possible.

For some reason i get an error though. I put the card number in exactly right, but it still gives me an error.

I get the same problem with visa gift card. But this should answer your question.
Some Help

So i must purchase a moneypak in order to transfer?