"Man cannot understand me while alive" was God's response to Moses after he requested to understand God's essential nature. Man can grasp only those ideas that are connected to the universe. For example, a blind man can not comprehend the concept of color, or light. This is because the idea itself has no means of registering on the human mind, unless connected with some sense perception. And although there is an abstract explanation of light, such an explanation makes no sense to man unless correlated to a sensual experience. This is simply due to our design. Similarly, I cannot grasp what resides inside a close, opaque, soundproof box, since none of my senses can penetrate that enclosure.
For this reason, man cannot know what God is, since God is completely removed from the physical universe. Thereby, man has no channel through which he might approach a understanding of God's nature. All that we can know about God is what He revealed through the Torah, or by our study of creation. But this knowledge is not of God Himself. Rather, it is the knowledge of His manner of managing man, the universe, and His manner of creation.
Therefore, the statement, "God contracted (tzimtzum) Himself in Creation" can only be understood metaphorically to mean that God revealed but a portion of His wisdom in the universe. That is, His creation reveals but a portion of His knowledge to man, since physical creation embodies but a portion of His wisdom.
But it is heretical to suggest that God occupies space, and had to physically contract Himself to make room for the physical universe.