It's possible those "blanks" weren't spaces. One might have been a tab or the result of a special cursor positioning terminal command. Did you try dumping the output as seen by Expect into a hex editor?
No I have not done that. However, if I add the my "Password: " template the entire text the server is sending my way (such as "Connecting to ..." etc, on previous lines) the match works just fine with double quotes (and I have not touched the blanks when I added the "Connecting to ... " text to the template.
I'm pretty sure your problem is not the double-quotes. I would focus my attention on the data coming from the server - it may not be what you think it is. I've been using Expect for years, starting with the TCL version, and this kind of problem is very common.