That isn't a Kobo error. That error is being reported by the SmartDevice App driver. And it is just reporting what the the device has told. And the device in this case is KOReader. Which means that KOReader is reporting less than that size is free.
After selecting the "Ignore device free space" option in the driver configuration, did you restart calibre? Changes to driver configuration do not take effect if the device connected when the change is made.
Other than that, it is either a calibre issue, or a KOreader issue.
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