1. It is quite clear that you cannot purchase Prime with a gift card.
2. Your friend is incorrect - Prime does not offer lower price books for your Kindle, but you do have access to a lending library where you can borrow certain books (one a month) and it is only for certain books.
3. I have been a Kindle owner for over 2 years. Amazon has never "encouraged" the use of gift cards for ordering books for the Kindle. What you do need to order books for your Kindle is a credit card on file..that is for 1-click purchasing. And if you happen to have a gift card balance the funds will come from there first. So whether or not you have a gift card balance, you stil need to have a credit card on file for 1-click purchasing.
4. Personally, I certainly hope you used some kind of points to get that gift card - it makes no sense to me to purchase a gift card with your own money and then complain that you have to spend your own money to get something
5. We all have to take responsibility for reading "the fine print" - and this "fine print" is not buried