TextPad cannot handle a variable number of newlines in an RE. If there's a limit to the number of newlines, you could do several replacements -- first with no newlines, then with one newline, then two, etc to the max.
Or you could replace all /n by something that's not in the file, for example <newline>. Then do the replacement, and finally replace <newline> or whatever you used back to \n.
1) replace \n by <newline> (as an regular expression, replace all)
2) replace </error><newline> by </error>\n (so we will have one error per line)
3) Find ^<error>.*What ever my error description was.*</error>$(as an regular expression, mark all)
4) Edit-Cut Other-Bookmarked lines
5) replace <newline> by \n.
This seems a little bit teadious but when the logfiles gets up to few hundred Mb and 75% are useless entries the manipulation worth the few minutes it take
You should be able to make a macro out of this sequence. TP macros are a bit hard to use because you have to get them right in one shot -- no editing -- but if you're doing this repeatedly, it will be worth the effort.