From the theologians I've read on the topic, it's not so much a translation error as a context issue. Apparently "the eye of the needle" was the name for one of the gates going into Jerusalem. It was very narrow, and a fully laden camel would never get through there. The only way to make it through was to first unburden the camel of its load. The theory goes that Jesus is presenting a metaphor; the rich man must unburden himself of his wealth, in the same way that the camel must be unburdened of its cargo.

Not vouching for that as the absolute truth of the matter, it's just the version I've been given to understand.