So I had exactly the opposite issue that most have. I have 6 gigs of internal storage and only 2 gigs on my SD card. I essentially set my "thumbs up" playlist to make available offline, but it is larger than 2 gigs by itself. In addition, I have doggcatcher to download my podcasts. Because I installed google music on my SD card it appears that the files are saved on the SD card by default. Because I have more internal storage, I would actually prefer to change this, to have google music use the internal storage RATHER than SD.
However, because I have doggcatcher, and by default doggcatcher "shares" the podcast files with other media, it was filling up my SD card so that I could store very little music. I turned off sharing, and made sure my auto-delete options were setup to delete podcasts flagged as done, and now the situation is much more acceptable.