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Your iPad's storage under iPadOS 27.2 is broadly as expected. Here is screenshot taken from my own iPad a few moments ago:

Your iPad's local storage is independent of your iCloud storage. Your iCloud+ storage is fully independent of - and not a replacement for - available local storage on your iPad.
You may struggle with an iPad that has so little internal storage. The 32/64GB devices are arguably better suited for use in Educational or retail settings, or in environments where the ability to store local data on the device is not required.
To significantly improve system performance, iPadOS 26/27 makes considerable use of available local storage for caching frequently accessed data. Within limits, cached data will be automatically purged from your iPad - releasing local storage as it is needed for other tasks. Unless you are actually running-out of space for your locally stored data, automatic management of your local storage shouldn't be problematic.
It is generally recommended that you maintain at least 4-6GB of free space at all times - as your iPad needs some temporary space to complete many tasks. When performing system software updates, you may temporarily require considerably more...
A system software update requires sufficient space to be downloaded, unpacked and verified prior to installation - major version updates requiring considerably more space than an incremental point-update. The required space, to perform an OTA update, is typically double the stated space for the installed update; after the update is successfully completed, temporary files are automatically deleted - returning free space.
If your internal storage is full, or is insufficient for the task that you need to perform, your only option is to better manage the storage that you have - and delete unused Apps or unneeded data.
These support pages should prove to be helpful:
About storage on your device and in iCloud – Apple Support
What's the difference between device storage and iCloud storage? – Apple Support
Manage your iCloud storage – Apple Support
How to check the storage on your iPhone, iPad and iPod touch – Apple Support
Clear Other storage on your iPhone or iPad - Apple Support
“Offloading” Apps can be a helpful method of creating temporary space for a software update:
https://9to5mac.com/2020/01/21/how-to-offload-apps-in-ios-to-save-space-without-deleting-their-data/
Additional information about creating sufficient space for installation of a software update can be found here:
If you need more space for an update on your iPhone, iPad, or iPod touch - Apple Support
External storage options can often help with managing limited internal storage. Depending upon your iPad model, the iPad will either have a Lightning or USB-C port - and may therefore require either an Adapter or USB hub to connect the USB Storage device. If your iPad has a Lightning port, you’ll need an Apple Lightning to USB3 Camera Adapter:
- Lightning to USB 3 Camera Adapter
https://store.apple.com/xc/product/MK0W2ZM/A