The most common reason for an error regarding insufficient space has to do with the Play Store cache size on your device. Often you can resolve this with these steps:
- Go to Settings/Applications/Manage Applications/Play Store
- Clear Cache and Data
- Also clear Cache and Data for the Download Manager
- Try to download again
If that does not work, it's possible other applications are using too much system cache. Try looking at "cache size" for other apps to find a possible offender.
For a fuller explanation of these issues, please see: