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The important part here is that the collapsing of whitespace would only affect the message digest, not the text as seen by the user. Two texts which read the same, but differ in whitespace, would have the same signature. If you recieved both files, you could see the difference in spacing, yet the same signature would be valid for both files. The main vulnerability is that a message whose meaning is partially encoded it its whitespace (like an ascii graphic, map, or chart) could have its meaning altered, without affecting the validity of the signature. Clearly one would not want to use this signature method on such texts. It would be a good feature for the signature algorithm to warn the user if it detects a pattern of whitespace that might convey information. I am not sure how to detect this reliably, though.
How about two signatures, verbatim and space-collapsed. That way if the latter was valid but the former was not, you would know that spacing was altered but other info remained valid. sdw