The Nerve Gear can theoretically simulate pain as well as all other senses.
Inside, there were numerous signal transceivers. By using the
electronic signals sent by those transceivers, the gear accessed the
user’s brain itself. The user didn’t use their eyes or ears to see and hear,
the signals went directly to their brain. In addition, the machine could
access not only sight and sound, but also: touch, taste, and smell as
well—that is to say, all five senses.
But the players in SAO apparently don't feel pain except for some discomfort.
Kuradeel wrinkled his brow and curved his lips upwards, then
stabbed my right arm with the tip of his sword. He then twisted it twice,
Although I didn’t feel any pain, an unpleasant feeling of being
stimulated in the nerves passed through my entire body alongside the
strong paralysis effect. Every time the blade dug into my arm, my HP
decreased slowly but steadily.
Pain Absorption is introduced as a setting that regulates how much pain the player feels from a wound.
The flames coursing through my nerves were extinguished by the
sensation of thick metal piercing through my body. The center of my
chest was pierced through by the sword, which seemed to be deeply
rooted in the floor. Though there was no pain, I was being assaulted by
Hearing Asuna’s cry, I met her gaze while trying to tell her ‘I’m
However, faster than my voice could come out, Sugou suddenly
spoke out to the darkness in the sky above with a booming voice.
“System command! Pain Absorption, change to level 8.”
That moment, a sharp cone of pure pain spread through my back,
as if I was stabbed.
When a groan leaked out of my mouth, Sugou howled in laughter.
“Kukuku, there’s still two more treats for you. The pain will get
stronger gradually so look forward to enjoying it. When it gets lower
than level 3, I’m afraid it seems you’ll still feel the symptoms of shock
even after logging out.”
Considering that ALO is based on the SAO technology we can likely assume that this setting was used to prevent the SAO players from feeling any pain.
As to their screams I think that it just natural response when you are in panic and realize that you could/are going to die.
The first and second excerpts are from the first light novel and the last one is from the fourth (translations by Baka-Tsuki).