ProSeries Live Fonts lost the use of the space bar in a later version of Mac OS X 10.5 and higher. It's something that was changed in the system and happened after LiveType was no longer officially supported.
1. Type the words with a hypen (Mary-Ann), highlight the hyphen and drop the opacity to 0%.
2. Set each word on its own track and you can move them around however you want.
Both of these are pesky but hey, this is software that was discontinued in 2009 and it will never be fixed.
The first one will at least give you consistency in your spacing though. Just hope you don't get a job that has a huge block of scrolling text or learn Motion - the LiveFonts are available there too.
I was doing pretty much the same thing that Nick Holmes was/is doing. I used the 'option key+space bar' for the spaces between words. Adjusted the tracking and set the red x box to zero opacity... copy to the clipboard and pasted where I needed a space.
If you have FCS-3... Motion 4 fixed this problem. (LiveType was moved to Motion 4 in FCS-3. I still prefer to use LiveType.)
Mountain Lion fixed this problem with LiveType.