Fix normalize_paths to allow whitespace

This fixes normalize_paths so that it strips whitespace before and after
paths before working on them. This allows you to do specify excludes
with multiple lines in the config file.

This also tweaks normalize_paths so that the behavior matches the
docstring.

This also adds tests.

Fixes #339
I split this up because `if not value` could be any falsey value and the docstring states that this function returns a list, thus it should return an empty list in these cases.