When I set up pages on itch.io recently, I notice the words "stick" together for some reason, and messes up the layout of the text.

When I try to figure out what is going on in the html editor, I realise a lot of my spaces are   (non-breaking space), which causes the words to stick together. I ended up having to type everything in the html editor to make sure my spaces are normal spaces and not non-breaking spaces.

I have set up a lot of pages on itch.io and the problem only came up recenty? Some new update must have introduced this bug/feature?

No, it's an old bug. People have been discussing it a lot recently.

Same for me, only for the last few months. No issues with any of my older projects.