On my phone (LG Shine Plus), I click "Settings" and then "SD Card & Phone Storage" and it shows how much storage is left.
I have run into the same problem. Sometimes deleting a few apps will allow me to download or update an app. But for "Angry Birds", I can not update or download it anymore even if I delete a bunch of apps and free up a lot of phone memory. Funny thing is I was able to download "Angry Birds Rio".