Resolution:
Yes, but to do so you must use the Windows "short-hand" method to indicate the directory element which contains the space.
As an example:
       rtserver -command c:\program files\foo.cm -no_daemon  (* would not work *)
should be converted to:
       rtserver -command "c:\progra~1\foo.cm" -no_daemon  (* will work *)

From Engineering: There is no real way to do this (launch RTserver with a space in a directory name under WIN/2K).  We would have to change the rtadmin parsing routines to be able to handle that.