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I believe the free space is based on the allocated file size, not the amount of free disk space.
If you have unlimited growth turned on, then the alert is useless - it always returns 100%.
I raised this particular issue (for DB2, but works the same on SQL - I've tried) and got this info:
Explanation for DB Freespace Alert: The Database Freespace Alert returns 100% freespace when ANY database managed tablespace file in the database returns with a MAXSIZE==Unlimited and Autogrowth is enabled. This is because the file can grow until the disk is full and we do not have disk space size information from the database so it is evaluated as being 100% free space.
The good news is that for SQL Server you can at least write a Custom Alert to check space used and free disk space, although you will have to work within the limitations of the format(s) of a Custom Alert.
There are a couple of Custom Alerts that may be helpful:
Thanks for your response Greg. I guess I'll have to keep at it with other methods like powershell. I appreciate your help.
Utility Control Point might be worth a look if you're using enterprise edition, works pretty well..