ESX - Insufficient disk space on datastore

Good morning experts.

I am having a problem adding a virtual drive to a VM running Windows Server 2008 R2. I have a new raid volume in the server. In the Virtual Infrastructure Client, I was able to add a storage volume (configuration>storage) and it is currently showing Capacity - 544.25 GB, Free - 543.63 GB.

The target VM is running Windows Server 2008 R2. The VM is shut down when I go into Edit Settings to add another Hard Drive to it. I click Add>Hard Disk and go thru the wizard:
     - Create a new virtual disk
     - Enter 500 GB as disk size
     - Click Specify a datastore and select that new 544 GB datastore
     - I leave Virtual Device Node at its default setting SCSI (0:1)
     - I do not change anything under Mode

I click Next and Finish, and then Ok to add the drive, but get the error Insufficient disk space on datastore. I'm guessing there is some silly setting I'm missing someplace since this raid volume was just rebuilt, initialized, etc. Should be totally empty. What am I doing wrong?

Thanks in advance for your help.