file with spaces in name can't be download.

Files/URLs are not accessible if they contain reserved or non-ascii characters.
See url_generation.patch here http://drupal.org/node/43505#comment-316523

They can be downloaded but the filename stops after the first space. The file [ This is the file.mp3 ] will be downloaded as T.mp3. It's normally not a problem to have filenames with spaces regularly through apache. Can this module atleast replace the spaces with underscores, or provide better URL's (using %20 instead of the space) ?

Alright I see it already places %20 in the URL which does nothing. I also noticed that the extension gets dropped when download too which is a big problem. Maybe replace the spaces with underscores upon uploading?

Still a problem with the latest release. The module is very complex. Can you at least point me toward which function I can alter to replace spaces in the file name. That seems to be the easiest way to fix this problem. Perhaps just replace them with underscores..

Can you at least point me toward which function I can alter to replace spaces in the file name.

If you'd like to just replaces spaces with underscores, you should install the Transliteration module, which will fix not only spaces but also any non-latin characters that might cause issues on your server.

Other than that, I think this problem should already be fixed in the latest release, per #487078: Mime headers causing Firefox to truncate filenames with spaces. If you're noticing the problem in Firefox and when you're using Private File downloads (the only combination in which this problem has appeared).