Today's news is that they are moving out. A different building within the grounds of Kensington Palace is being prepared for them, so they will move out later this year.
So yes, there is a lot of credibility to the story that the Gloucesters were willing to let Harry & Meghan take Apartment 1. They didn't take up that offer but it seems it was made.
Even if the Gloucesters are moving, it doesn’t mean that their current home isn’t in need of renovations. Frogmore Cottage was going to be renovated regardless of whether the Sussexes moved there or not.