So I just managed to get the 4.08.605.2 update on my Inc. Before that update - after extensive clean up of data and export/import contacts, etc - I managed to open up the space on my data/data folder (according to the hotfix app) from ~16mbs/149mbs OPEN to ~39mbs/149mbs open. That enabled me to have enough open space to actually get the OTA update to 4.08.605.2 (the three previous attempts all gave the "out of space" message).
After that OTA update was applied and all the restarts were complete, I ran the hotfix app and now i have ~67/149mbs open. I can only hope that whatever changed will minimize how many times I have to deal with that issue. Although I don't recall seeing anything on the OTA contents lists that would explain that change. I don't mind though.
Does anyone know why that happened?