Remember that Google Music now has scan and match, so if you're downloading albums to your device, each track is probably the 320 kbps track, which will be larger than your typical track that was ripped at 192 or 256 kbps. The average album will probably be somewhere between 50 and 100 MB in size--multiply that by 140, and you get 7-14 GB, so it's no surprise that your Nexus is telling you there isn't enough room to cache all of your music offline.
Any reason you can't enjoy the music in streaming fashion over wifi?
Oh, and by "All Music," I mean the button at the top left which toggles between music on "Device Only" and "All Music," meaning all music in the Google Cloud as well as on your device. Obviously, you need to be connected to the internet to access music in the cloud.