Hi there! I am Ben a fellow user like you here in the community.
From your description, you've already tried most of the common troubleshooting steps, so I'd first like to clarify one thing because it's easy to confuse the two.
Windows local storage and OneDrive cloud storage are separate. If the 500 GB remaining refers to the free space on your PC's hard drive (for example, your C: drive), that won't affect how much storage is available in OneDrive. OneDrive uses its own cloud storage quota, which is independent of your computer's local storage.
To verify your OneDrive storage, sign in to: https://onedrive.live.com
If OneDrive on the web also shows that you still have plenty of available cloud storage, then the "OneDrive is full" message may indicate a storage quota synchronization issue rather than an actual lack of storage.
However, if your PC's local storage is what's running low, you can free up space by ensuring your files have been successfully backed up to OneDrive, then using the Free up space option on synced files. This removes the local copy while keeping the file safely stored in OneDrive, allowing you to download it again whenever needed.
For more information about Files On-Demand, see: https://support.microsoft.com/en-us/onedrive/save-disk-space-with-onedrive-files-on-demand-for-windows
If possible, please share a screenshot of the error or where you're seeing it. This will help me and other Community members better understand the issue. Just be sure to remove or hide any personal information before uploading it.