I have this problem too. I bought the card with cash, redeemed it, and can't gift anything. I just got a reply from Apple Support, that they consider it 'store credit' and I can't use 'store credit' to gift an album. I'm not going to take this, I started another case, and will call and call, post and post. I find this concept for a company completely ridiculous and rotten!!
Straight from the horses mouth:
"Greetings from iTunes Store Customer Support. My name is Chaitanya and I am happy to assist you today.
I understand that you are unable to gift an album. I know how important this is for you and I am glad to provide you the necessary information.
I am sorry to inform you that it is not possible to gift an album from the Store credit you need to add your credit card information to gift an album.
If you have any additional questions regarding iTunes, please let me know and I will be happy to assist you further. I hope you continue to enjoy the iTunes Store.
Have a nice day!
Sincerely,
Chaitanya
iTunes Store Customer Support"
http://www.apple.com/support/itunes/ww/