Editing the cfg worked for me as well... which is odd, since I didn't even get the error the first two times I started up Fallout. There was the initial startup after intstallation (to make sure it worked, which it did), then there was the startup to play a real game (that is, with a character I intended to play).
It was only after having a couple of save slots used, and starting the game for the third time that I got the error message. o_O

I had this problem. I have a wacky theory and if it's full of baloney I'm fine with that. But I can play fine if Fallout is the first thing I start up. So I start as soon as I boot up and then minimize and do other things. Works fine. Once I start Fallout, I can go back and forth to other things just fine.
My wacky idea is that Fallout tries to play according to the OS or emulated OS that the first program you open uses. So if you open modern stuff first, Fallout thinks it's on a machine that can't run Fallout, and then Fallout can't address its files properly and run. If that's spooky and/or stupid, I'm okay with that. It's just that my way works, so I built a theory around it.

I had the same issue when I first installed the game. I didn't launch it immediately after installing, so when I tried to do it several reboots later it gave me the "hard disk space" error. I went to edit the CFG file, but since it had never run the file wasn't there.
I ended up uninstalling, verifying there were no left over registry keys and then reinstalling. I launched immediately after the install and it worked. Then I quit the game and attempted to start it again. "Hard drive space" error reared its ugly head. This time the CFG file did exist. After editing it down to zero I've had no problems playing the game since.

Same issue for me, and I'm running Vista. Closing other programs or emptying my recycle bin seems to fix it.

I just encountered the same problem and the CFG edit fixed it. Thanks for suggesting it pkt-zer0!

Had exactly the same problem and fixed it exactly the same way. So, thanks :)
Strangely I could play Fallout 1 flawlessly for several days, but only yesterday that problem occured.

had the same problem, fixed by setting Windows 95 compatability mode

space rook, thanks it works

Exact same issue.
Windows XP SP3, Intel E7200, 2GB DDR2 memory, NVidia 9800GT, 120gb sata hard drive (split into 2 partitions)
EDIT:
never mind.
changing compatibility mode worked.
I used search first time, saw this one result with no responses so I made my reply, realised that I had replied directly off the search response with the end result of simply bumping the thread, my bad...

Space problem in Disk is very common problem. Junk files are the reason for this problem. you should use Krojam Cleaner its best way to remove junk files and increase disk space.

Why would they? It's spam.