UPDATE:
I thinks it's fixed now. You might want to try the latest OSGeo4W installer and test it again. I just tried it on my computer and it installed QGIS on C:\OSGeo4W hereby avoiding the problem with spaces. Good luck :)
You'll have to edit batch files and convert the paths with spaces to their short names. Particularly qgis.bat
@echo off
SET OSGEO4W_ROOT=C:\Program Files\Quantum GIS Lisboa
call "%OSGEO4W_ROOT%"\bin\o4w_env.bat
call "%OSGEO4W_ROOT%"\apps\grass\grass-6.4.2\etc\env.bat
@echo off
path %PATH%;%OSGEO4W_ROOT%\apps\qgis\bin;%OSGEO4W_ROOT%\apps\grass\grass-6.4.2\lib
start "Quantum GIS" /B "%OSGEO4W_ROOT%"\apps\qgis\bin\qgis.exe %*
The following line
SET OSGEO4W_ROOT=C:\Program Files\Quantum GIS Lisboa
should be
SET OSGEO4W_ROOT=C:\PROGRA~1\QUANTU~1
On 64-bit Windows, it should be
SET OSGEO4W_ROOT=C:\PROGRA~2\QUANTU~1
Since the problem is with the spaces, supplying the short names of the path should solve the problem.
By the way, I'm assuming that you don't have other versions of QGIS. If there's an older version then it would be
C:\PROGRA~2\QUANTU~2
and so on depending on how many older versions there are. Thanks for pointing it out @Andre.