IOS – Why does the phone say I have less space than iTunes does

I think that iTunes is trying to use your gobal Windows temporary folder. By default, this directory is in your user Local Settings directory, located on the same drive as Windows. This is a system-wide setting that applications are supposed to follow.

You can change the path to this temporary folder by changing the value of the TEMP environment variable. You'll have to restart iTunes after changing the variable to have it take effect.

This happens from time to time. You can get a recalculation of the space by connecting to iTunes and power cycling the phone.

If that doesn't work, you may need to back up the phone and erase it and set up as new - seeing that the space used is correct, then erase a second time and restore the backup.