The problem may not be with actual number of apps installed, but with the amount of disk space used by the apps. The Palm Pre's HD is configured with three partitions:
1) /dev/mmcblk0p1 defined as a Linux/PA-RISC boot partition is only 4MB
2) /dev/mmcblk0p2 defined as Linux partition and is 32MB mounted as /boot
3) /dev/mmcblk0p3 defined as a Linux LVM partition is 7.62GB
The /dev/mmcblk0p3 partition is a Linux Volume Group that is sliced into six Logical Volumes:
/dev/store/root mounted on / (root) 456 MB
/dev/store/var mounted on /var 256MB
/dev/store/update mounts on /var/lib/update 56MB (not mounted)
/dev/store/log/ mounted on /var/log 40MB
/dev/store/media mounted /media/internal 6.69GB
/dev/store/swap linux swap 128MB
It appears that if /var or / (root) usage is greater than or equal to 90% than the FAILED_NOT_ENOUGH_INSTALL_SPACE error is generated. "Builtin" applications reside in /usr/palm/applications. Downloaded apps and those installed with palm-install reside in /var/usr/palm/applications. Also for rooted Pre's some linux-based apps are stored in /var/opt.
One fix for a rooted Pre is to create a virtual linux filesystem using a portion of the space allocated to //media/internal using a procedure similar to this one:
Linux Online - Using a file instead of a partition
Then use it on /opt vs binding /var/opt to /opt. Of course moving everything under /var/opt to the new virtual filesystem.
NOTE: The /dev/store/update is mounted when you run the Update process. It would seem that the updates are stored here (at least some of them) prior to installation.