I was helping someone upgrade from 8.0 to 8.1. Even with iTunes I couldn’t do it. Even with iTunes it requires over 600MB of space. And if I do OTA, it will require over 2.3GB of space.
Apple should absolutely stop selling 16GB iPhones. This is totally hurting their image. Anybody who had used iPhone for some time and take photos/videos, will easily run out of space.