Purchased an Xbox gift card from retail store will not allow me to redeem card. The store...

If you want to play a game without the disc make sure you a purchasing a digital download online from the Microsoft store instead of purchasing a disc. This buys the game and allows you to internally download it directly to your hard drive on your console.
Most retail games with be disc format, occasionally you can find some digital purchases at the retail store by buying a digital copy of it on a gift-like card that allows you to redeem the code online.

If you have enough Microsoft reward points, then you need to redeem the reward points for Xbox/Microsoft Gift Cards on the redeem page of Microsoft rewards. Then once the gift card codes have been emailed to you, then you can redeem those gift card codes on https://account.microsoft.com/billing/redeem Once you have enough money from the Xbox Gift Cards, you can then purchase Minecraft from the Microsoft Store or Xbox Store (depending on which version you want).

This page covers most of those details. Check the FAQ at the bottom.

The important parts would be

"Do gift cards expire?

No, gift cards purchased at retail never expire. Note that promotional gift cards like those from Microsoft Rewards or Xbox Live Rewards do expire."

"What is the difference between a Microsoft Gift Card and an Xbox Gift Card?

The cards work just the same. Once redeemed to your Microsoft account, you can spend your balance at Microsoft Store online, on Windows, and on Xbox."

"Where can I spend a gift card?

Once redeemed to your Microsoft account, your gift card balance is available to spend when you shop at Microsoft Store online, on Windows, and on Xbox. Gift cards do not currently work at physical Microsoft Stores."

Should cover you. One thing I'm not certain with is if "gift cards" can be used to pre-order physical goods. Might want to check with Microsoft Store support on that?

Unfortunately this card only has a 16 digit code on the back. It also states that it is only for making purchases at Microsoft retail locations and is not redeemable for purchases online? So am I stuck with $150 of Microsoft Store gift cards?

Points cards will work the exact same way as the upcoming gift cards work until "further notice". They're the same thing essentially.

What happens to Microsoft Points cards?

Xbox gift cards will be available for purchase in retail stores and through online retailers starting in late 2013. Microsoft Points cards you purchase in retail stores will continue to be redeemable on your console and Xbox.com until further notice. Microsoft
has no plans to discontinue acceptance of previously purchased Microsoft Points cards and codes.

Source: http://support.xbox.com/en-CA/billi...ccount-management/microsoft-points-retire-faq