I don't think it's a problem. I just installed it on 16,7GB drive, 16GB is the Volume Group and it shows 4.1GB free space before doing any updates.
After apt-get upgrade && apt-get dist-upgrade it shows 3.1GB free space. Keep in mind, I made the boot partition only 200MB, not 500MB how the tutorial shows.
Your lvm volume is already mounted - you running backtrack on it, probably that's why it gives errors.