I have a recurrence of issue #28, where a paper-input element located inside a paper-item does not accept the space character.
The reason that the fix for the linked issue does not work in my case is that the paper-input element is added via the insertion point.
<paper-item>
<content></content>
</paper-item>
From what I have gathered the cause of the problems is that due to using the content element the paper-input is part of the shadow dom.
I have seen that the spaceKeyDownHandler(), which paper-item inherits from the iron-button-state behavior tries to detect whether the target of the keyboard event handles the input itself. But it assumes that children located inside the shadow dom don't do this.
At the moment it is unclear to me whether this is a bug or working as intended, but to me it seems like adding a paper-input through the content element should work correctly.