I keep having an error message when I try to create a new test case.

To be able to create a test case (a link between a requirement and a test document), you need a registered TEST repository (such as a space from Confluence) and a registered REQUIREMENT repository (such as a JIRA project) on the same  GreenPepper project.
Make sure your  GreenPepper project also has a defined system under test.

Is Confluence as a TEST repository mandatory?

No, it is not but it is highly recommended because the  GreenPepper plugins for Confluence offer more flexibility and more functionalities. Furthermore, you may write your tests directly in the text fields of your JIRA issues since they are designed for it.

Some of the retrieved pages from Confluence have underlined macro errors.

To prevent deadlocks, we ask Confluence not to provide the GreenPepper macros for third-party applications which result in an underlined error on the page provided.