Thank you all for your responses. I figured out and confirmed (by email from US embassy) what you all have said. Yes, it is referring to a personally obtained prepaid envelope not being accepted. Wow, It's like they are trying to make it more difficult than it has to be.
Oh wait....., forgot who I was dealing with for a second ......yep, makes sense.
I am about to pay. Please confirm if you can. They DO NOT accept Thai debit cards (for the 130$ passport renewal fee), is that correct? Thanks