Is this really said? Seems like an angocism
Yes, this can be said in Portuguese. =)
What's an angocism? Google doesn't help me out here.
I'm guessing they mean a phrase borrowed directly from English. The proper term is a calque: http://en.wikipedia.org/wiki/Calque
What a wonderful word, though I suppose the OP actually meant "anglicism": http://en.wikipedia.org/wiki/Anglicism
Why is "isso" used here instead of "esse"?
"Isso" means "it". "Esse" means "this/that" and is followed by a masculine noun.
isso = that - when there is no gender to the thing it refers to.
isto = this - in the same way
"Mas não faz sentido" is sufficient to say "It does not make sense"
Is "não tem sentido" also correct?
Yes, also right.
Why is "THAT does not make sense" considered incorrect?
Does not make sense versus makes no sense ???
The is not to understand
Just like the previous sentence!