Had an interesting problem on one of the SANs that will be used to setup a failover clustering installation. The issue error "'There is not enough disk space on the destination disk for the current SQL server data files" and when I have checked relevant drive there is more 300gb free space avalable. In this case you need to check whether the specified path for failover clustering exists on that drive/disk, also ensure the relevant login used to install holds ADMINISTRATOR privilege on the disks....(
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Read the complete post at http://sqlserver-qa.net/blogs/tools/archive/2008/01/04/error-there-is-not-enough-disk-space-on-the-destination-disk-during-a-sql-server-failover-cluster-installation.aspx