Well, there isn't or at least there shouldn't be a limit to a library, since you have enough space in your hard drive. This problem usually happens when there's no space left for downloading new content to the library. That's why deleting files in your computer to free some space (not necessairly iTunes content) could be useful. However, if you have free space in your HD and you still get this message, then you may have errors on the hard drive that cause iTunes to read the free space erroneously. Try running scandisk or checkdisk on your hard drive. Unchecking songs will reduce used space on your iPod (if it's set to sync ony checked songs), but won't reduce the amount of space your library takes.
