Here is a fix I just verified from Microsoft resources and guaranteed it works.
First of all:
#1
In the Windows search,
Search for Windows Powershell, right-click it and choose run as administrator.
Next, execute this command:
set-executionpolicy remotesigned
Afterwards, select Yes to All when prompted. Keep the Window open.
#2
Download this script.
Make two folders on your C drive root, with names 1 and 2, so their paths are as follows:
C:\1
C:\2
Paste the script file you downloaded into folder 1.
In the Powershell window, navigate to the C drive folder and enter this command:
cd C:\1
This will ensure the folder which contains the script is selected. Now, we need to run the script, which increases the size of WinRE. For that, run the following command:
.\1.ps1
After that, press Y to confirm running the script.
When you are asked for the backup directory(this is used to ensure that your device remains bootable if anything goes wrong), enter
C:\2
Press Enter.
Wait till your PC restarts.
After that, if you check for updates, the update should install successfully.
The script does not exist anymore.