There is alternative repartitioning that resize system partition without resizing userdata partition, so we don't have to lose any data. It enlarges system partition to 1674MB and shrinks cache partition to 50MB.
cache: The cache partition stores temporary data and is optional if a device uses A/B updates. The cache partition doesn't need to be writable from the bootloader, only erasable. The size depends on the device type and the availability of space on userdata. Currently 50MB-100MB should be ok.
Just try restarting the phone once or twice. It works!
So, I did a full wipe of my Nexus 5, following the instructions from the repartition thread. Installed hh_clarmor_repartition.zip which went just fine, after install was able to format all partitions. Installed RR-O-v6.2.1-20181209-hammerhead-Final.zip which again went just fine. However, just like before, even when trying to install micro gapps, it still says there isn't enough room. This seems crazy, because after the repartition shouldn't there be plenty of room?
Really confused. Do I really have to install the pico version? I'm stumped here. Do I need to boot into RR first, and then reboot back into recovery? I installed the TWRP version from that repartition thread as well, so that's not the issue.
Any help is greatly appreciated, as without gapps... well... kinda useless.