This is a problem with the new Market. It used to be app's installation file (apk) would download to your data partition, but when Market was updated, it was changed so that apks are downloaded to cache. Samsung Captivate only has a 30MB cache, and this is fixed. Any app that is larger than 30MB will throw this error.
Give this a try, go to:
Settings> Applications> Manage> Market.
Then: clear cache, force stop, clear data, and uninstall updates
This will revert you back to the old version of Market, which should allow you to install the app. Eventually, Market will update itself again.
Good luck
I get this on my Captivate everytime I try to install Baseball Superstars 12. When I check my storage I have 1.2 gig on the external and 10.96 on internal