What happens when you use all of your steam cloud save space?

By the looks of it, it's per game, and you can follow the steps here to see how much you've used up and how much you have left.

Having a read here it seams that when it's full - its full and nothing gets deleted ...

Since your hard can support it (and to be honest save files aren't that large) I'd disable Cloud Save for that game.

So I contacted Steam Support and asked the same question.
Here's their reply:

When cloud storage is full, Steam will no longer be able to add new files.