Your storage display graph is different than on my Mac. Is that what came up when you clicked on Apple Logo/About this Mac/Storage? It says that the disk is shared with 5 volumes. So it appears that it may be partitioned. Did you buy your Mac second hand, or other than brand new? If so, perhaps the previous owner partitioned it. On a second hand computer, iMovie may not have been bundled on it.
My storage display, with two external drives, looks like this:
There are no limits to the size of an iMovie library folder. If it gets very very large, like 500 GB, there might be a drop off in performance, and possibly some crashing. If iMovie is on, or ever was on, your Mac acquired under your Apple I.D, you should be able to update/redownload it.
I do not know what might be happening in your case to give the insufficient space message. Perhaps the partitions are causing the problem. It may be simply a matter of moving the iMovie library from one partition to a larger one. You might want to call Apple Support and talk to the techs there. They have the capability of remotely accessing your computer, that we cannot do here. To contact Apple Support click on the Get Support item in the upper right hand corner of this forum's screen. Navigate to a place where you can enter you phone number.
-- Rich
-- Rich