I have exactly the same problem as well. you may want to read this https://connect.microsoft.com/IE/feedback/details/649949/innerhtml-formatting-issues-on-very-large-tables
YOu can remove the space inbetween td by using javascript if your html is returned from ajax, then from the response, you replace it with
response_html = response_html.replace(/td>\s+<td/g,'td><td');
$('#table').html(response_html);