Hard Drive not working properly?

Check what drive it was trying to download the game onto, it might be trying to download into a folder on a CD in your optical drive or something which would create errors. You should have more than enough space on the hard drive.

The physical memory you see in task manager's performance tab is your RAM, windows does its best to get stuff into memory that it expects you will need so your free memory is usually very low, the cached memory is technically available in that if a program wants it it will just kick something that windows precached out and use that space.

You just checked your memory stats in Task Manager, not your HDD space.