Does Apple not use visa gift cards anymore as valid payment?
No, but you can add your Vanilla Visa debit card to Apple Wallet and use to Make purchases and Make contactless payments.
See the following Apple articles:
Set up Apple Pay in Wallet on iPhone
Set up Apple Pay in Wallet on iPhone – Apple Support (UK)
Make purchases using Apple Pay
Make purchases using Apple Pay - Apple Support
Make contactless payments using Apple Pay on iPhone
Use Apple Pay for contactless payments on iPhone – Apple Support (UK)
You can't use your Vanilla Visa debit card as a payment method in App Store & iTunes Store.
You can use Apple Gift Card or App Store & iTunes gift card as a payment method in App Store & iTunes Store.
See -> How to redeem your Apple Gift Card or App Store & iTunes gift card
How to redeem your Apple Gift Card or App Store & iTunes gift card – Apple Support (UK)
When redeeming a gift card, (1) the amount will be credited to your Apple ID balance and (2) then you need to set your Apple ID balance as your default payment.
(1) See -> Check your Apple ID balance
Check your Apple ID balance – Apple Support (UK)
(2) See -> Change, add or remove Apple ID payment methods
Change, add or remove Apple ID payment methods – Apple Support (UK)
If you update your payment method or add funds to your Apple ID balance, It would take about 1 to 3 business days in order to process.
If you're still unable to update your payment method, Contact Apple Support.