Hey there,
I have been dealing with this same issue for a couple months and I have finally found a solution. My phone was out of memory but I deleted all of pictures on the phone; Itunes still insisted I had over 4,000 pictures. By this time, I was about to do the .99 cents to upgrade my storage space but instead, this is what I did:
Go to Settings --> General --> Date & Time --> UNTOGGLE Set Automatically
**You need to set your date back a couple years. After you set the years back, go to:
Photos --> Albums --> Recently Deleted
** You need to delete all of this "Recently Deleted Pictures". For some reason all the pictures you deleted months back are still on your phone! Once you delete all of the pictures in this folder, you will have memory!!! Now I can use my phone!
Don't forget to set your date and time back to normal once you are done.