@FAJ, 1.05 and 1.06 update are fine. 1.07 update has been known to give and "insufficient space" error message - possibly also 1.09.
I updated to 1.05 and played the game fine. I then updated 1.06 and that was fine too after I played the game briefly. I then installed 1.07, 1.08 and 1.09 one after the other (without booting into the game in between), and got the error.
My suggestion is at least boot the game between each update.
BTW: the above error only seems to affect GT5 (all other backed up games play fine). I've haven't resolved the issue yet as it happened way late last night and I'm currently still at work but I'll post my result if and when I sort them..
"We all agree your theory is crazy, but is it crazy enough?" - Neils Bohr