I have a project that is in a folder that has a space in it.
The build fails as it looks like the path is not being included in quotes.

I first found the problem with an older version of VM, it failed to upload supporting files due to the space.

Upgrading to the latest VM and to project no longer built.

I have now removed the .sln, .vcxproj, .filters and .user file and renamed the folder without a space and re-opened the Arduino project to recreate the removed files.

Without the space the project builds correctly.

Hi Tim,
the problem appears to be in the recipe hooks. 
I put together a quick 4 line project that runs a pre-build script:

In board.txt:

# Increment version before build
recipe.hooks.sketch.prebuild.1.pattern=cmd.exe /c {build.project_path}\version.bat {build.project_path}\fwversion.h
 

In version.bat

@echo off
setlocal EnableDelayedExpansion
set "file=%~1"
set "major="
set "minor="
set "version="
for /F "tokens=1,2,3" %%A in (%file%) do (
	if "%%B"=="FWMAJOR" set "major=%%C"
if "%%B"=="FWMINOR" set "minor=%%C"
if "%%B"=="FWVERSION" set "version=%%C" )

for /F "tokens=1,2 delims=." %%A in ("!version!") do (
	set "oldmajor=%%A"
)

if "!major!" NEQ "!oldmajor!" ( set /a minor=0 ) else ( set /a minor+=1 )
(
	echo #define FWMAJOR !major!
	echo #define FWMINOR !minor!
	echo #define FWVERSION !major!.!minor!
) > "%file%" 

Output:
# recipe.hooks.sketch.prebuild.1.pattern
Exec: C:\Users\nigel\AppData\Local\Temp\VMBuilds\Test Space\esp32_esp32s3\Release\.vm_sys\cmd_exec.bat
C:\Arduino\Avionics\Test Space\version.bat C:\Arduino\Avionics\Test Space\fwversion.h
"C:\Users\nigel\AppData\Local\Temp\VMBuilds\Test Space\esp32_esp32s3\Release\.vm_sys\cmd_exec.bat"
   C:\Arduino\Avionics\Test is not recognized as an internal or external command
   operable program or batch file

Supporting files
With the supporting files upload, this fails with the following error:

LITTLEFS Creating Image...
[LITTLEFS] data   : C:\Arduino\Avionics\Test Space\data
[LITTLEFS] offset : 0
[LITTLEFS] size   : 128
[LITTLEFS] page   : 256
[LITTLEFS] block  : 4096
"c:\program files\microsoft visual studio\2022\professional\common7\ide\extensions\hvnkygxf.dmf\Micro Platforms\visualmicro\tools\espressif\fs\mklittlefs.exe" -c "C:\Arduino\Avionics\Test Space\data" -p 256 -b 4096 -s 131072 "C:\Users\nigel\AppData\Local\Temp\VMBuilds\Test Space\esp32_esp32s3\Release\bce8ecd06ccdf1507ccd2590a6c8d6a1/Test Space.ino.littlefs.bin"
/test.html
LITTLEFS Uploading Image...
[LITTLEFS] upload : C:\Users\nigel\AppData\Local\Temp\VMBuilds\Test Space\esp32_esp32s3\Release\bce8ecd06ccdf1507ccd2590a6c8d6a1/Test Space.ino.littlefs.bin
[LITTLEFS] IP     : 192.168.0.212
"python.exe" s\espota.py" -i 192.168.0.212 -p 3232 -s -f C:\Users\nigel\AppData\Local\Temp\VMBuilds\Test Space\esp32_esp32s3\Release\bce8ecd06ccdf1507ccd2590a6c8d6a1/Test Space.ino.littlefs.bin
 
LITTLEFS Upload failed!
usage*: espota.py [-h] [-i ESP_IP] [-I HOST_IP] [-p ESP_PORT] [-P HOST_PORT]
   [-a AUTH] [-m] [-f FILE] [-s] [-d] [-r] [-t TIMEOUT]
espota.py*: error: unrecognized arguments: Space\esp32_esp32s3\Release\bce8ecd06ccdf1507ccd2590a6c8d6a1\Test Space.ino.littlefs.bin

Let me know if you need the full output but I think this pretty much identifies where the problems are.