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:
  1. Go to Settings/Applications/Manage Applications/Play Store
  2. Clear Cache and Data
  3. Also clear Cache and Data for the Download Manager
  4. 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: