Hi guys!
Same situation here with my iPhone 4 on 6.1.3 : I had the message DOWNLOAD AND INSTALL in the settings/general/software update tab since IOS7 became available. Yesterday night, I plugged my iPhone in my iMac and I noticed later that it was missing about 2.5 GB of space. Found that the other space was the culprit and when I opened the software update tab, the message had changed to INSTALL only. What a mess..
Clearly, with a wifi connection and sufficient power, IOS7 is becoming self-aware.. 🙂
Joke aside, I was able to erase the download file by resetting the iPhone to factory settings (erase all settings and contents). After general reset, it shows a free space of 13.7 GB on a 16 GB model (as expected) and the message in Software update return to DOWNLOAD AND INSTALL.
When I replug it on the iMac, it tries again to initiate the download of the IOS7 big file (around 700MB). To prevent that, I unplug the iphone and put it in airplane mode. An interesting thing happened in the Software Update tab : IOS7 download just stop and a new button appears, saying RESUME DOWNLOAD.
So, I just carefully avoid to push this button and, since yesterday, it appears to stay indefinitely in a "waiting to resume downloading IOS7" state.
I've check free space on the iPhone and nothing appears to have been downloaded so far, even if I'm currently on wifi.
The last thing I need to investigate is if the RESUME DOWNLOAD will stay that way even if I plug the iPhone on my iMac for sync, but I don't have time now for that..