<?
$testString = "test";
for ( $i=0; $i < 10; $i++ )
   $testString .= chr( 160 ) // &nbsp = chr( 160 ), I use this to concat fields for display in multi-select

$testString .= "end"

print $testString; // will print as it should here   'test          end'  but,

sendToFunction( $testString );  //pass to function
?>

<? // my application has the function in a separate include file
function sendToFunction( $string ) // I also tried passing by reference and got the same result.
{
print $string; // only prints    'test'
}      
?>

Standard installation used, nothing special.  Using Apache 1.3.4

Hope this is useful!