Photos in iCloud is principally a synchronisation service that keeps a copy of locally stored photos. All devices signed-in to iCloud with the same AppleID share the same iCloud storage. Photos from all devices will be available to all devices - addition or deletion of photo being synchronised.
Photos in iCloud is designed or intended to be used independently of your iPad or other devices.
Having chosen an iPad with so little local storage, you will always struggle with available space. If your internal storage is full, your only option is to better manage the storage that you have - and delete unused Apps or unneeded data.
These support pages should prove to be helpful:
About storage on your device and in iCloud – Apple Support
What's the difference between device storage and iCloud storage? – Apple Support
Manage your iCloud storage – Apple Support
How to check the storage on your iPhone, iPad and iPod touch – Apple Support
Clear Other storage on your iPhone or iPad - Apple Support
“Offloading” Apps can be a helpful method of creating temporary space for a software update.
https://9to5mac.com/2020/01/21/how-to-offload-apps-in-ios-to-save-space-without-deleting-their-data/
Additional information about creating sufficient space for installation of a software update can be found here:
If you need more space for an update on your iPhone, iPad, or iPod touch - Apple Support
External storage options can often help with managing limited internal storage. Depending upon your iPad model, the iPad will either have a Lightning or USB-C port - and may therefore require either an Adapter or USB hub to connect the USB Storage device. If your iPad has a Lightning port, you’ll need an Apple Lightning to USB3 Camera Adapter:
- Lightning to USB 3 Camera Adapter
https://store.apple.com/uk/xc/product/MK0W2ZM/A