I have done a complete uninstall and deleted all saved data from every nook and cranny I could find! Reinstalled the base package (standard version of MSFS) and restarted the Xbox. It showed the Deluxe/Premium upgrade screen but this time allowed me to download/install without informing me about insufficient space. I then reinstalled a couple of payware DLCs and everything seems okay. Not downloaded any of the WUs.
Changed the rolling cache to 16gb (from 8gb). No idea what this means or how it affects anything but it was recommended in the other thread.
Powered the console down and will try again in a few hours — of course the litmus test will now be whether everything works when the console is next turned on…