How to optimize storage for iCloud photos?

I have 60GB of photos on my computer with iCloud sync. It's preventing me from running an update. Storage optimization should be intelligent enough to know that this can be reduced in order to install applications and updates. The only work around for this is turning off iCloud photo sync, deleting all the photos, installing the update, then turning syncing back on. Storage Optimization is so dumb, it runs one time to get the storage available, syncs up to that amount, fills my local storage, then kicks back and drinks a few beers while any change comes back with "disk full."

[Re-Titled by Moderator]

Original Title: Photos takes up all leftover space, unintelligently