Well the original amount of space on the device is only what it has before 'anything' was installed on the device. So the original OS, and any apps, etc., that were placed on it by the manufacturer already took up space. That just isn't advertised when they tell you the amount of space. It is kind of just assumed people understand it. So the update didn't remove that much space, it just took up more space than was originally taken. There is no way to have the full 32GB of space accessible, not without completely wiping the device of all things including the OS, which would make it totally useless. You can never have access/use of the full space.
Now you can use the SD card that you install for many things, to free up space, by moving files, or saving new things like photos, etc., to the card. However apps themselves cannot be just saved to the card. That requires other things be done.