You can get around that immediate problem by copying the _Inline/config file from another location into the C:\Documents and Settings\_Inline folder - ie run an Inline::C script in (say) C:\nospaces, then copy C:\nospaces\_Inline\config across to the C:\Documents and Settings\_Inline folder.
But, with gcc at least, that only defers the problem. You'll get to the stage where
gcc -c -IC:/Documents and Settings ... gets run - but it needs to be run as something like
gcc -c "-IC:/Documents and Settings" ....
To fix that problem you need to hack at C.pm. There's a patch at
http://rt.cpan.org/Public/Bug/Display.html?id=4150 which you might find useful. I think (not sure) Eric Wilhelm has a build of Inline (google for Inline-0.44_01) that does permit the running of scripts inside directories with spaces.
For mine, the best solution is to not run Inline scripts in paths with spaces. In fact, one would be best advised to *never* enter such locations under any circumstances whatsoever.
Cheers,
Rob