Ed, it is a space problem.
You can search for how people are getting their devices repartitioned at B&N stores.
The shortcut (until you get the repartion done) is:
1) Archive some apps and games you aren't using. Please make sure these are not apps that store data or game progress. Since archiving deletes that.
2) Restart your Nook.
Power Off: Hold down power button for 20 seconds.
Power On: Hold down power button for 4 seconds.
3) Download the app now.
Thanks! I had this problem with other apps and it solved it for me too!
It is NOT a space problem-it is a B&N server problem! I tried to update Angry Birds Seasons on Friday and got stuck in the download/install loop (and I have even more memory open on my NC than the OP). Tried it again yesterday and it updated without a problem. Apparently, B&N has been having server issues since Sandy and has been trying to whitewash it!
When apps are downloaded they are downloaded to the Shop Partition. It's different from what free space your Nook shows.
Your Nook Shows - Total Free Space.
Apps download to - Space left in Shop Partition.
If you archive or delete something you bought from B&N, then it clears the Shop Partition. You also have to restart Nook for it to recognize this properly.
So, if you have this issue in future, you don't have to wait for 'Server to be fixed'. You can just archive some other apps (not ones that save data as archiving deletes all data) and then you can restart your Nook. After that the download will work.
I only have a few apps. I clear my shop history every time before I turn off the nook, plus I check for updates BEFORE doing any shopping. If it had been a space problem, the app would not have updated when I tried later. So it was obviously a server problem. So while for some people, the problem may be space, but for most it's a server problem.