To work around the error, edit the "<design name>.fdo" file and add double quotation marks to any vlog commands that contain spaces in the directory file name.
For example:
Change:
vlog C:/Program Files/Xilinx/verilog/src/glbl.v
to:
vlog "C:/Program Files/Xilinx/verilog/src/glbl.v"
For example:
Change:
vlog C:/Program Files/Xilinx/verilog/src/glbl.v
to:
vlog "C:/Program Files/Xilinx/verilog/src/glbl.v"