Here is a possible repair I have found:
Possible repair for E3 warning code PIXMA MP160 Paper Jam which does not exist.
Have you run a 3 paper clean procedure? if not try that.
Try a thin cardboard A3 size and run that through the printer.
If this has not fixed the E3 jam, then I call it a E3 phantom Jam.
It seems to be a serious problem for Canon PIXMA MP160 printers.
Several web searches shows me this is a big problem.
Finding help seems to be very scarce on the ground with this one.
However, today (as I'm also suffering from the same fault), after seeking help and being told, take the printer to a service agent (100Klm away) I baulked.
I have taken my PIXMA printer apart 3 times now, so this access procedure does work.
Remove the power cable, and the USB cable.
Take the printer to a solid table.
Beware there are many small screws that have to be located.
Warning, this may not fix your MP160 PIXMA, you might break a wire, drop something, or loose a screw, its your responsibility what you do from this point on, not mine.
Reading from this point on it is assumed you have taken the responsibility upon your self.
OK, YOU need to take your printer COMPLETLY APART to "fix?" this E3 error.
You will need
a philips screwdriver (magnetised would help).
a small knife
Remove the paper flip, lift up stand from the rear, and the flip down door from the front of printer.
Take care at the front door, dont break the hinge taps off, prize the left one carefully with a thin knife or flat blade screwdriver.
Next remove the front plastic panel, where the paper comes out, its cliped on only, but be careful, start from the right side, it seems the easiest to access it from there.
There are 4 hidden screws behind it, which you need to remove next, they hold the left and right side panels (front access).
Turn around the printer, remove the 4 screws at back of printer.
Lift the printer on its side, look for a single plastic clip, (there is another one on the other side) you have to release these to remove the side panels.
Get another person to help you by supporting the scanner lid and whole top section (cause you havent got 3 hands)
Carefully prise away the side panels, be careful, the top scanner hinges on both side panels.
Remove the screw holding a (Earth) wire to side panel.
Remove black micro switch with orange wires, at the top at the side. (when working, it tells the program that the lid is closed and to proceed to scan)
Remove 2 x thin multi ribbon cables, that go downwards into the black sockets, pull them upwards. Take care you dont bend or break the other components that are close to them.
Put scanner top aside.
Remove 2 screws at the top back left and right of large plastic shell top assembly
Remove 2 screws at front near where paper comes out.
Remove large plastic top shell.
Told you it was a big job
The innards should now be seen
Look down inside the guts where the single grey paper drive wheel is, look closer just above it, you should be able to see a small micro LED switch.
There is a black leaver that goes in and out of this LED switch, make sure it is not stuck, or jammed from moveing by a bit of paper or broken pen, a coin, etc etc.
There is a tiny tiny spring which holds the leaver in the LED switch.
How this all works.
The paper is fed into the printer from the hopper, the edge of the paper is prevented from moving forward by 2 small claws, when the printer is going to feed the A3 paper edge into the printer, they go down, alowing the paper edge to feed under the big wide paper feed in roller.
The motor rolls the roller, the paper is fed into the feed slot, it then hits the tiny black vertical lever, this when moved, alows the LED to illuminate the receptor, telling the onboard CPU in the printer that a sheet of paper is on the way to be printed on.
If the paper cannot proceed past this point a paper JAM is flagged, as E3 and you need to press the green <|> button to clear it.
If all goes well, the program continues to feed the paper forward to stop at the edge and the inks squrt their stuff on the paper (thats how its supposed to happen).
If there is no paper jam, check the free movement of the small black leaver.
Is there any forign matter wrapped like hair restricting its operation?
If all is well, reassemble in the reverse order, take extra care when inserting the flat ribbon cables into the sockets.
Take care and dont rush, plug the cables into the printer and test it.
If this hasnt fixed the problem, it may be a broken gear in the drive chain, or the program EEPROM is wonky.
Hope this got you out of trouble.
To reset the inks, take a look for MPTOOL.rar via google
Download a free RAR unzipper and unzip your ink unlocker tool.
This might help you when you are reinking.
Speaking of reinking, why not try the pensioner reinking trick, use food dye, seems to work OK, not as good and bright colours as the real thing, but, well real inks are pricing themselves out of existance.
Once again, don't take my word for it, doooo a web search, read up about it.
Petrol is $1.35 ltr Genuine Black inks are $21.00 for 2 X 20ml bottles. and riseing
Genuine Colour is $23.00 for 3 X 30ml bottles
Food colouring is about $1.00 a bottle, and you can even get black food colour as well.
get a whole more for your bucks.
You can even print in invisable ink, do a U TOOB (tube) search. use 3 invisible pen inks
After this repair, and it still dosent work, get it repaired professionally, or, take to it with a gas axe like the fellow on U Tube did, I laughed and laughed, he never said a word.