Tab "& nbsp;" becomes & #160; characters and published as      Â

try this…

#set($result = $sys.item.getProperty('rxfield').String.replace("<p>\u00A0</p>","<p>& nbsp;</p>"))- tested and working discard space in & nbsp
#set($result = $sys.item.getProperty('rxfield').String.replace("<p>\u00A0</p>"," ")) - not tested