Me and some of my workmates have come across this issue quite a few times so thought about sharing the solution with everyone.
Problem:
When a SQL Server Reporting Services 2005, 2008 or 2008 R2 report gets exported to PDF, the spaces of a Project Server Multiline text fields appear so condensed that it looks like a long line with out any spaces. The same report looks fine on screen and exports with proper spaces to Microsoft Word. This is apparently an SSRS bug. Follow the solution below to fix disappeared spaces problem.