I've reproduced this myself on a 4G usb key, setting the reserved space
to max (3.1G), as I've outlined in the description.

Comment #7 on bug #562312 does indeed describe what is happening.  I
think there's a whole class of issues that can occur, which produce a
range of different (and confusing) error messages, crashes, and so on.

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https://bugs.launchpad.net/bugs/685017

Title:
  Jockey should warn on insufficient disk space in LiveCD environment, else get 
error "package nvidia-current 260.19.21-0ubuntu1 failed to install/upgrade: 
subprocess installed post-installation script returned error exit status 1"

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