I keep getting 'Invalid arguments in set_current_car'

I found another way to do this:

BMAP* car = "car2.bmp";

function set_current_car()
{
//ent_morph(car_pan, car);
car_pan.bmap = car;
}

However still curious if ent_morph can be used on panels...

No it can´t be used for panels. As the name says ENT_morph so it´s only for entites

If this not work directly with bmp make some simple panel model in MED and then put this panel in model like skin. Now you can use ent_morph for change panels (models). Best thing is when you one time set entity (panel) positions, this work good on all resolution. I use something like this in my game.

If you want use entity istended of panel, you can try next:

and later when you want change panel:

Panels are completely different type structures compared to entities. You can't expect to use a PANEL* in a function that specifically requires an ENTITY* any more than you can expect to use a BMAP* where you need a STRING*.

What you need to do is use bmap_load or something to load a bitmap into your car_panel.bmap.