Can you make a small sample .TXT file which demonstrates the problem and upload it to this thread? It may be that the extra spaces are in your source file rather than a result of the conversion.
(You may get more responses if you post in calibre's conversion sub-forum rather than in the main forum. There is also a helpful 'sticky' in the conversion sub-forum which describes the best way to ask a question about conversion. See http://www.mobileread.com/forums/sho...d.php?t=186697