"Not enough Space" error

[Nerd Cave Craftworks]

For those of you having problems with install errors regarding insufficent space, you will probably get asked to "Verify Game Cache Integrity". While this is good advice it will be totally worthless if you truly don't have spare HDD space, or the less obvious error that your harddrive may be formatted with FAT32. The FAT32 filesystem can't create large enough files to install PoE. You instead need to be running NTFS.

To convert your HDD to NTFS from FAT32 you can do the following without data loss (nothing's 100% foolproof so backup just in case):
1) (Optional) Backup your HDD, to be safe
2) Run "Command Prompt" as Administrator
3) Type convert drive_letter: /fs:ntfs (example: Convert D: /fs:ntfs would convert the D drive)
4) You will be prompted to enter the volume label of the drive
5) You may be prompted with a Y/N to close out anything running on that drive, agree to complete

The time to complete will vary for everyones different amounts of data and hardware specs. My non-flash 1TB drive with 250GB of data took about 3-4 minutes to complete. This fixed my problem with the installer crapping out with PoE.

[Nerd Cave Craftworks]

Here's the reference article on the FAT32 to NTFS conversion, it's always wise to verify what you're doing before making a change to your pc.
http://windows.microsoft.com/en-us/windows/convert-hard-disk-partition-ntfs-format#1TC=windows-7

[The_Driver]

Why does that error even pop up? It's supposed to be another error since the client update of 27th January 2014:
http://store.steampowered.com/news/12281/

Show “invalid file system” if a game tries to install files larger than 4GB on FAT32

So if that "not enough space" really popped up for you, you should file a bug report with steam...