I checked with MS today that it was indeed okay to pay for my annual dues with multiple gift cards. I bought 60 $50 cards today and need 20 more, but was able to save at least $220 by getting them at Target.
Actually returned the next day and bought $1800 more of the gift cards--this time using the Red Card for a 5% savings, plus the $10 Target gift card on each $50 Disney gift card. Woo hoo!!!