This message refers to the main memory. Some apps can be moved to the SD Card. Move as many as you can. There is a cool free app called Diskusage (green SD card looking icon). I use this to track down problems. One program that causes problems is Download Manager. The cache can fill up when programs don't install. Clear the cache. Mine was up to 3GB.
Thanks for the input. I will give Diskusage a try.
I think part of my problem is that when I look at Storage and USB, it says that I've used 7.53GB of 37.24GB (SD Card); of which, 4.7GB is used by the Android OS.
The problem is it only has 8GB of main memory. All updates use main memory not the external 32GB card you plugged in. 8GB is very small for main memory. Move as many apps as possible to the SD card. Clear the Download Manager cache and see what that gives you. You need at least 1-2 GB in main memory free for updates.