MS made changes in more recent updates to make them install a bit easier on 32GB devices but you have to get there first - somewhere around early 18xx builds you will encounter a big road block in terms of updating on a 32GB device so it is easier to simply do a clean install on latest media
If you have any real software also installed i.e. some come bundled with Office 365 components it becomes a big problem and the installation's way of dealing with space while offering to use additional USB storage, etc. doesn't help as it often sabotages its own efforts by making inefficient use of internal space each time it retries and additionally it seems fussy sometimes what external storage it will and won't use.
I found in the end I had to create update media as well as find a USB stick it was happy with (for temporary space while updating) to update 32GB devices from older builds to more recent ones as trying to do it via the Windows update process would always result in being ~100MB short of space whatever I did.
Whoever is working on Windows 10 developer wise these days are a complete joke and hideously out of touch and refuse to engage with the real end user experience even when given the chance.
EDIT: Fortunately I only have one 32GB Windows 10 device myself - but it has been a pain trying to assist several people with low end 2in1 devices, etc.
