javac fails because the java compiler provided with the SDK does not handle spaces in path provided up to the Source File. While it is true that spaces are not valid for package names, the directory structure beneath the package directories can have spaces without consequences. If absolute paths are going to be fed to the java compiler by the javac task, then spaces should be escaped in a manner appropriate to the OS.
This bug is already known and fixed in CVS head. You can download a nightly build from http://cvs.apache.org/builds/ant/nightly *** This bug has been marked as a duplicate of 10499 ***