I solved my problem but here is a helpful tip if same happens to you.
I use iTunes for phone updates as it uses ethernet, backups which using phone itself I am told does not back up, and the nice, detailed update steps on the iTunes screen.
This time at end of backup it errored out saying no room in disk used for backup. It said using Recycle bin. After looking at properties of Recycle bin it had a capacity of 8 GB and showed the 7 GB Apple .ispw file in it (guess the file has overhead). So I changed the Recycle bin to 10 GB and reran the update to completion.
Then I cleared the Recycle bin and tried to do my other phone. Same error but this time nothing in Recycle bin. Then I started doing a manual search for large files and found a large one that I then deleted. Reran iTunes again and worked this time.
Then I wondered why I was running out of space with a 1 TB disk. I cleared everything I could clear and C drive still only showing 118 GB size. Finally after more stress and research I discovered that somehow my disk allocation had changed to 118GB “C” and 900GB for “D” drive. Have no idea how or when that change occurred. Have opened ticket 2604705 for help from Woody to get that changed back.
Hope this helps anyone else with this weird problem.