How does Gatsby represent the American dream? What does the novel have to say about the condition of the American dream of the 1920's?

You are addressing a theme of the book - that the American Dream can become corrupted.  The American Dream was, and still is, that anyone, no matter how humble the birth, can rise up to become whatever he or she desires if he or she is willing to work hard.  Jay Gatsby despised his humble birth and background.  He knew at a very young age that he wanted more out of life than what his parents had (see chapter 6) and some proof of that is in what Gatsby wrote in the book his father brought with him to Jay's after Jay died.  He knew he wanted wealth from an early age, but when he met Daisy in 1917, his American Dream shifted.  He still wanted wealth, but now he wanted Daisy, too.  To get Daisy, he had to have wealth and the class status that he thinks comes with it.  His dream is now corrupted because, while he can get wealth, he can't get the social status that he seeks.  Also, he garnered his wealth mostly through illegal or at least, unethical, means.  He didn't become wealthy through proper channels, so again, his dream is corrupted. As for the American Dream in general in the 1920's, Fitzgerald sees it somewhat cynically.  He indicates that while one may accumulate wealth, one never can become completely accepted socially.  He sees the classes as being so separate and distinct as to be gaps impossible of being bridged. He saw the upper class as snobs who only accepted others of their same social position, regardless of one's wealth.  The people from East Egg, in the novel, are these old monied people while the West Egg residents are more like Gatsby, the nouveau riche who are rough around the edges and tolerated only because they have money. They are never accepted though.  Just like Jay is never accepted into the East Egg society.  People use him; they go to his parties, but they never accept him socially. To Fitzgerald, the American Dream was something of an impossibility.