Well the Size of the majority of software updates are about 500-700MB.
If you are getting a error message related to not enough Disk Space, you'll have to clear out Space on your comptuer until you have that available.
I always suggest having Atleast 1GB of free space so that your comptuer has enough space for Temperary history, and caching files.
If you are getting a "Unknown Error Occured "Error number here" You will want to go to Support.apple.com/kb/Ts1275 and search for your corrosponding error number
Did you try to update "Over the Air"? Running iOS 5 on your device, go to Settings/General/Softwareupdate, make sure that your're on Wi-Fi before you start, then downlaod the update. Done on the phone the size is less than 50MB. It is faster than downloading 700MB onto your computer.