Solution 1:
Perform a Save as of the document, instead of copy/pasting it from the browser or View Source of the in the browser window and using that for modifying the document.
Solution 2:
If we use a different browser like Firefox, the result on the screen is correct.
Note : For examples of this behavior, please see the screen shots attached to this solution.
Background:
When you copy/paste from Internet Explorer and use it as a modifier for QuarkXPress Server, QuarkXPress Server is unable to find the spaces.