The free space discrepancies between iTunes and iPhone is an aged issue. Not solely an iOS 10.3 issue. I now only trust the device one, but only use iTunes one for reference.I upgraded to this second beta of iOS 10.3 last night, and I've still got a problem understanding how free space is calculated under the new file system: iTunes says I've got 5.2GB free on my 16GB iPhone 6, but a quick look in Settings under General/Informations says otherwise, at 3.6GB.
Why the difference? Does the phone store the whole firmware somewhere, should it need it to restore as a new phone for some reason? If so, it's not a bad idea, but a serious waste of free space anyway.
I too was enthusiastic at first at how much space could be regained by upgrading to iOS 10.3 beta, but now, I'm not so sure...
But the iOS devices do store firmware in an individual disk location. Was a partition before iOS file system was HFS+. 4.3 GB in size.