Thank you for sharing the screenshots and details of what you are trying to create for a store discount and the error you are also receiving.
A common issue that I see in support is a misconception of how the Buy X Get Y discount works, and I just want to ensure that isn't the cause of your error here. The Buy X Get Y discount requires that the free item be in the cart before the discount can be applied. It does not pull the free item in after the fact. This is to avoid the possibility of misuse where items are added to the cart without the customer permission.
If this is not the problem and the minimum order amount threshold is met and the free item is in the cart, I would recommend reaching out to our live support for further troubleshooting. This way they can ensure the correct products/collections are being chosen and escalate further if something is not working as expected. To contact our live support please follow this link: Shopify Help Center - Contact Support, sign into your store account, search for "discount code error" and use the contact support button at the bottom of the search results to see all our live support options.
Let me know if you have additional questions about this I can assist with here.
Shay | Social Care @ Shopify - Was my reply helpful? Click Like to let me know! - Was your question answered? Mark it as an Accepted Solution - To learn more visit the Shopify Help Center or the Shopify Blog