you can buy an iphone with gift cards, just need to apply some portion of it to a major credit card. this site details requirements:
http://ipod-iphone.blogspot.com/2007/12/holiday-reminder-apple-gift-card-iphone.html
Quote:
Apple has confirmed that gift cards are a perfectly viable form of payment for the Apple iPhone as long as they are not the only form of payment involved. A credit card is still required. Most stores ask that the buyer put the first $20 of an iPhone purchase on a major credit card and allow Apple gift cards to be used for the remainder. Technically, however, putting any amount of the purchase on a credit card meets Apple's requirements.