Option to delete backups when storage is full not working

Backups ran fine initially, for full backup and then 6 incremental ones. At this point, I have 130 GB of free storage left on the external drive, which is not enough for another full backup, and even though I have the option checked to delete backups when storage is full, the backup keeps failing every day with the message "not enough storage space" (or something like that). Surely, the disk shouldn't have to be completely full before it will delete backups to make room for new ones? It kind of defeats the purpose of "set and forget." I went ahead and deleted them manually and the full backup is currently running.

I know sometimes there is an option to delete an archive but also there is a check box to delete from disk as well.

They do only delete "sets". As long as one cycle is not completed they do not delete nothing. You'd better do with "Full"?