I have the same problem on Windows 7. From time to time I play League of Legends and space is not registered as a key. Weird however is when I go to ingame rebind option space can be actually assigned as a valid key (and still not working). Is it possible that DirectX is messing with that key?
Hardware solution would be the best ;)

You'll notice that there are several input modes (or is output modes more accurate?) for PKL. The default is very good for most things but you may want to experiment with the others for these applications. Look in the pkl.ini file, and there's another file you may have in the main folder which specifies mode for different applications.

Indeed, for the most difficult situations (typing on PlayStation, anyone?) a hardware solution is awesome. I'd like to make a QICO (QWERTY-in-Colemak-out) device with all the Extend++ trappings some day... :-)

Oh, hang on: That's mostly about non-ASCII input it seems. In pkl.ini, here's how to set the hotkey to change mode:

; The original mode for non-ASCII characters may not work with 
; all programs (for example GTK applications, like Klavaro or Pidgin)
; so you can try alternative modes with this hotkey.
; If you have found the best mode, you can write it into the 
; nonASCII.ini; and please send it to me as well!
changeNonASCIIMode = ^+3

So, if it's the Space specifically. Well, what you could do is to remove/comment its mapping from the PKL layout.ini file! Then it should pass through the hook and be seen by everything else. However, that'd make Extend mode impossible so another tack would be to try a VirtualKey mapping. Either way, you won't then be able to bind fancy stuff to for instance AltGr+Space. But you may not need that?

But if your Flash games are unwilling to listen to anything, then it's because they're stupid. Flash is sometimes very, very stupid I'm afraid. :-(

I don't use it. But since I'm too nice, I googled it for you and found Farkas Máté's default file at BlackDuck OpenHub:

[global]
; Default mode for non-ASCII characters.
; Possibly values:
;     i : with SendInput windows message. Maybe this is the best
;     a : With Alt+Numbers on numpad
;     c : Copy the character to the clipboard and paste from it
default = i

; There are two clipboard modes: If Restore mode is not active, sending a
; Unicode character (like '') will erase the current clipboard content.
; If Restore mode is active, the clipboard will be restored
; after a short delay (3 sec). This may be slow if the clipboard content is huge!
restoreClipboard = yes

[programs]
; Predefined modes for programs
klavaro.exe = c
skype.exe = c
totalcmd.exe = c

Yup. I wouldn't build it into a keyboard but use it as an USB dongle. Which means USB shield. And yes, I want to do that. And no, I haven't yet. ;-)

It's pretty sweet that you can buy one for only $50 though! Kudos to the Geekhackers!