We are running SQL SERVER 2008 R2 STD 10.50.4295 which is the most recent build and we can duplicate this issue on demand. the only workaround we have found is to set the two ANSI settings on (ansi_warnings and ansi_padding) for the connection. We tried setting these within the procedure and outside the procedure with no luck. I have updated the connect item posted earlier, however, it being closed not sure that MSFT will see it.