I have windows 98 around, but yet not be able to reproduce your problem, seems that no one around can reproduce it.

Why don't you take Perl out of the loop, design a simple test: go to your dos command prompt, and type,

echo WithMany              Spaces

and see whether it makes all the spaces into one, this can narrow down the problem, and tell whether it is with the echo command of your dos/win system, or your version of Perl.