I have no such problem. I updated to 3.40 OE-A from 3.03 OE-C.
To mfz64: Of course the space in flash is getting less, each Sony upgrade adds more stuff to it! Not to mention Custom Firmware adds a ton more stuff to it as well...
As for gaining some space, there was a program that would erase an unneeded file to give you more space in the flash, but I forgot what program it was.
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