Just checked out from bzr.

Between each of these tests I deleted all the products and ensured the files table was empty (it always was).

1. If the ubercart_images directory does not exist, it is not created and no images are uploaded.
2. The images do not go into 'ubercart_images' directory if it does exist.
3. My image file with spaces in the name was saved on the hard drive and in the database as 'Cool%20Shot.JPG' and not 'Cool Shot.JPG' when the image path was specified as a URL. Imagecache will not generate product-list etc images for it. upper/lower case extension makes no difference. It is difficult to export it as imagecache can't produce a thumbnail. When I manually create a product, the image is saved on disk as 'Cool Shot.JPG' and then it all works.
4. If the path in the XML file for an image with a space in the name is an absolute path and not an URL-Encoded URL then everything works and the above is not a problem.
5. If the space in the image file name is not URL-Encoded and the path is an URL, fopen can not open the file stream. this may be an issue with file_put_contents?
6. as noted elsewhere, if two different products use the same image, two different image files are created, one with _0 appended to the filename.

Making progress! Re-importing products that already exist no longer result in the images being re-uploaded with _0 on the filename.

-C