I think maybe spaces never worked in 1.0.5.7 and above with Firefox.
Paul Tulp's website is running WP2.2 and 1.0.5.8. He has a large number of image urls with spaces and they all work in IE7 and all don't work in Firefox.
Anyway, in my experiments tonight, I can make it work in IE7 and I can make it work in Firefox, but I can't find an easy way to make it work in both.
It is easy to play around with. If you look in plplus-mrss.php, you will find the following lines:
$imgSrc = wp_specialchars($imgArray['thumb'], true);
$imgSrc = str_replace( " ", "%20", $imgSrc );
$imgSrcFull = wp_specialchars($imgArray['full'], true);
$imgSrcFull = str_replace( " ", "%20", $imgSrcFull );
As written, it works in IE7, but not in Firefox. Comment out the 2nd and 4th lines and it works in Firefox, but not in IE7.
I don't know what to do about it. I could probably put in some code to detect the browser and change the behavior based on the browser, but that wouldn't work with caching plugins such as wp-super-cache.
Visitors to my website are about 75% Firefox and 25% IE, so I'm inclined to just fix it for Firefox and post a notice that you should avoid spaces in your image urls.