Im a little baffled at where that space is even coming into play.
To test the value of the breadcrumb and to make sure we are getting nothing unless we are on a page that has a breadcrumb and then when viewing a category where a breadcrumb exists try the following.
at the very top of layout.tpl.php place the following...
PHP Code:
{foreach name=outer item=contact from=$breadcrumb}
{foreach item=item from=$contact}
{assign var=category value=$item|strip_tags}
{/foreach}
{/foreach}
category ="{$category}"
then as you navigate around you site you should see category ="" and as you go into your carious categories you should have the category name in the quotes above. I just placed the quotes around it so we can tell if there is a space at all. Give it a try and let me know what it shows as you browse around your site.