False "low on space" (internal storage) warning on HTC Incredible
To consolidate comments:

I've found a fantastic guide to Android partitions and basics here via WIW's XDA post. /data is all your personal settings, messages, and information, while /data/data is specifically for your apps' private data. My guess is that wiping /cache as described above does not wipe /data or its child directories (otherwise you would've lost all your apps and settings).

I don't believe I've ever run against the particular error you're seeing - when mine has trouble I just get tons of force closes :-/. However, my app settings screen shows me what must be the /data usage (never close to full, numbers match /data size reported by DiskUsage) even though my apps are actually constrained by the much smaller /data/data (where I run out of room often). I think it's giving you an error because of /data/data but showing you details from /data instead. That's confusing as hell.

My dinc's /data is 748 MB and my /data/data is 149 MB. Sounds like that should be the same for yours (and others'). Until you give in to the dark side and root your Incredible (and are then able to see specific usage) you'll want to keep things below 149 MB (ish). FWIW, my biggest disk-hogs are Facebook and Dolphin Browser.