What is your concern about additional space in the output.  Excessive readability?  :)

I know you're mostly viewing HTML through DOM inspectors, and that's fine, but there's no need to throw out old-school principles of clean textual output.  I do sometimes go to the raw HTML (in particular when there is bad HTML with parsing issues that confuse the DOM), and the spaces make a big difference.  And, unlike the comments, this one doesn't pollute the dom inspection at all.

If it's an optimization concern, then I think you're frying minnows when there's an entire tuna in the freezer.

HOWEVER, in the long run, I think we should look into something like inline HAML which would let us set options to produce tighter or looser HTML.  That should address both of our concerns.