Preserving space between elements

Hi All,
 
I'm using an xsl stylesheet to transform xml into html (actually, I've got
an xml file which references the xsl file, and IE does the transform for
display).
 
I wish to transform:
    <row>text text text <literal>literal1</literal>
<literal>literal2</literal> text text text</row>
into:
    text text text <i>literal1</i> <i>literal2</i> text text text
so that there is a space between everything.  However, I end up with no
spaces between the two literals.  I'm not too surprised about that, but I
haven't been able to find a way to preserve it, short of putting an &nbsp;
in the xml source.  xsl:preserve-space hasn't worked for me.
 
Is this possible, and if so can anyone offer some pointers.
 
Thanks,
 
Steven