When I try to use my satchels I get from completing missions- it says- "you cannot do that with a full inventory" but only 16 of my slots are full. Why is it doing this?

The item that you're getting from the satchel is an equipment piece~
Your equipment tab must be full.

When you go to your inventory, there's an option near the top of the page. "Switch to Equiment"
You want to switch and probably sell the gear you don't use so that more gear can fit into that tab.