Le Lost King , I know what you're talking about. I'm having the same problem. To clarify, for those who might be able to help, the issue is that if you follow the instructions on Kali's live usb install page (http://docs.kali.org/downloading/kal...ve-usb-install) you end up with only limited space for the installation. As Kali is installed, two partitions are created: the first is a 3 Gb hidden HPFS / NTFS boot partition. The second is a 79 Mb FAT 16 partition.
If you try to update the Kali install later on, you run out of space because of the small partitions created during the installation. There's no way to give yourself more space because you can't change the size of the partitions. Gparted says you simply can't on the 3G partition (and I assume it would destroy Kali to edit that partition), while using Gparted to enlarge the FAT 16 partition gives an error. So, even if you have lots of space left on the disk, Kali still says it runs out of space when trying to update.
Any thoughts on how to give Kali more space during the initial install? I assume there's some way to do it with a custom .iso, but that's a bit out of my depth.