It's not spaces. It's only for indentation. If you don't like this, please use the following code:
string myXHTML=EditorUtility.ConvertToXml(Editor1.Text,false,true,false);
Demo:
XHTML (no indentation)::
asp.net Chat http://cutesoft.net/ASP.NET+Chat/default.aspx
Web Messenger: http://cutesoft.net/Web-Messenger/default.aspx
asp.net wysiwyg editor: http://cutesoft.net/ASP.NET+WYSIWYG+Editor/default.aspx
asp wysiwyg html editor: http://cutesoft.net/ASP
asp.net Image Gallery: http://cutesoft.net/ASP.NET+Image+Gallery/default.aspx
Live Support: http://cutesoft.net/live-support/default.aspx