The rocket definitely CAN take E sized motors!
The motor mount is sized for E motors. If you want to use a D motor, then use the orange spacer that came with the rocket to accommodate the shorter D motor. The D12-3 is good on a smaller field, and for your first flight, that’s what you should use.
But if you have some room for recovery and want to go higher, then the Estes E9-5 or E12-5 is good. You don’t need the orange spacer for those.
Or if you’d like to try a composite motor for higher, faster, and louder flights, an Aerotech E20 would be a great place to start. Don’t use the spacer. Also, you’d need a 12-volt launch controller to light the igniter that comes with the E20.