Apps (and app data) install to internal storage, not the SD card, and the Nexus One has only a couple of hundred MB (can't remember exact amount). When you get to less than 10% of the internal storage left it will not let you install any more apps.
What you can do:
* manually move some apps to SD. Go into the manage applications menu and you'll find that for many apps you have the option to "move to sd". If there's a "On SD card" tab in the manage apps menu, select that and you will see all of the apps that can be moved - just click on the app to get the option to move it.
Don't move apps which have widgets which you use, as the widgets will stop working.
* clear app caches: you can do this from the manage apps menu again (app by app), or you could install a cache cleaning app (lots of those in the Play Store).
* see whether any apps are using excessive amounts of data that could be cleared. App data always live in internal storage, even if you move the app to SD.
If these measures aren't enough, you'll have to "root" the phone to give yourself more options. But with any luck they'll keep you going for a bit
