The list generator works fine with spaces (i know because my path has about a thousand), but it calls mame to help generate the list. So mame cannot be in a directory with spaces, but lazarus certainly can. In other words all will be well, just keep mame and your roms out of directories with spaces in them.
I hate to be harsh guys, but mame was originally a dos program, and you should treat it as such. Keep your emu-related paths clear of spaces.