I must have introduced a non-printable character into the code somehow. I re-copied the code form his post and re-edited it.
 Code:
function a($, optional $k,$e,$m)
    $k=$k+$<' '
    $m=' ','	'
    $e=$<!
    while $
        dim $c,$n,$x
        $x=asc($)
        $n=128
        while $n
            $c=$c+iif($e,$n*(($k^$<' ')&$>),$m[$k^$x/$n])
            $x=$x-$n*($x/$n)
            $n=$n/2
            $=iif($e|$n=0,right($,~),$)
        loop
        $a=$a+iif($e,chr($c),$c+iif($,@,$m[$k]))
endfunction


 Code:
KiXtart Version  = 4.62
KiXGolf Script   = kixgolf_wo.kix
Scoring Engine   = 3.3
OS               = Windows 7 Professional Edition
CPU              = Intel Pentium Celeron
Speed            = 2394 MHz
Memory           = 4096 MB

Tournament       = Whitespace Obfuscation
Processing Start = 2011/11/15 07:32:13.205
Processing End   = 2011/11/15 07:32:13.423
Duration         = 0000/00/00 00:00:00.217
# Tests Run      = 40
# Tests Passed   = 40
# Tests Failed   = 0
Result           = Passed
KiXGolf Score    = 245

Thank you for participating in KiXtart Golf!


As for my code, it is now repaired. I used my editor to change TABS to spaces for better formatting. That alters the TAB I used in the code as well. Sorry for the error.
 Code:
function a($s, optional $k,$,$c,$e,$p,$z)
  $z=1,128,64,32,16,8,4,2,1
  For $c=1 To ($s^)
    $p=substr($s,$c,1)
    if $k
      ;Encode
      For $=1 to 8
        $a=$a+iif(asc($p) & $z[$], iif($k=" ","	"," "), $k)
      Next
    else
      ;Decode
      $=$c mod 8
      $e=$z[$]*(right($s,1)<>$p)+$e
      if $=0
        $a=$a+chr($e)
        $e=0
      endif
    endif
  Next
  $a=$a+$k
endfunction

 Code:
KiXtart Version  = 4.62
KiXGolf Script   = kixgolf_wo.kix
Scoring Engine   = 3.3
OS               = Windows 7 Professional Edition
CPU              = Intel Pentium Celeron
Speed            = 2394 MHz
Memory           = 4096 MB

Tournament       = Whitespace Obfuscation
Processing Start = 2011/11/15 07:44:24.959
Processing End   = 2011/11/15 07:44:25.099
Duration         = 0000/00/00 00:00:00.139
# Tests Run      = 40
# Tests Passed   = 40
# Tests Failed   = 0
Result           = Passed
KiXGolf Score    = 255

Thank you for participating in KiXtart Golf!
_________________________
Home page: http://www.kixhelp.com/hb/