We have seen this error when the temporary location DID have enough free space. The backup set was a system or Bare Metal Image backup. This error could also occur on System State backups.
This is a genuine error when there is low disk space, however, we have seen it once before when the backup software could not write to the temporary location. The dump files were open and locked, which meant the backup software could not overwrite them.
We closed all processes used by our backup software and couldn’t see any files locks in Server Manager. We believe the antivirus software had created the file lock.
After the server was rebooted, the issue went away. We also excluded the backup config files from being scanned by the antivirus software. On our server, these were, c:\users\username.obm and *d:* (this was the temporary file location and can be different on each device).