Hi Pete!
Thanks for bringing that point to our attention - it's a good observation, and one I did bring up internally for discussion with our developers.
In a perfect world, the path to the published output should not contain encoded characters. However, as you pointed out, the published output folder name in Storyline does use spaces. That has been the case since Storyline 1, and it doesn't seem to be causing issues for our customers at this point in time. That aside, I'd still recommend you follow the best practice of changing the name of the published output folder (so it doesn't contain spaces) before you upload it, if only to be on the safe side and to not have a messy-looking URL string.
Thanks for being such an observant community member, and for bringing up that very good point. :D