You will need about 6Gb free on the device before you can update.
If you can't update because of this, the easiest way is to do a full backup of the device, with itunes - make sure it is an encrypted backup - then reset the device (erase content and settings). Perform the update to IOS 8.1.2, and then use itunes to restore the device to the latest backup.
IOS is 8.1.2 now
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