Are you downloading the trial or downloadable versions of PE7? If so the target hard drive is the drive that you are downloading to. To work with PE7 you will need a minimum of around 40GB of free hard drive space. If you are struggling to find space to download the software there is no way you will have enough hard drive space to work with the software.
One thing, NTFS formatted hard drives can have single files of larger than 4GB... FAT32 formatted drives are limited to a maximum file size of 4GB... if the file size exceeds 4GB you will get a disk full warning. If this is the case it is simple enough to convert the drive to NTFS and not impact the already installed files. Is your drive actually full, or is there space but you are still getting the warning?
as already answered. target disk refers to the hard disk drive in which you are downloading Premiere elements. Since pre requires space of around 4gb, deleting the temp folder won't be of much use
You should clear a lot more space.