There are a number of relatively complex changes here. Comments are in order of where the change appears.

1.
When detecting text in a horizontal line, we already add a space between words if separated by more than word_margin apart.  However now, we only do it if there is not already an existing space. This prevents multiple spaces being placed between words.

2.
Detect a horizontal line if the line is zero width. This improves our detection of horizonal lines when looking for both horizontal and vertical.

3.
Don't detect a vertical line if the previous letter is whitspace. Prevents double spaces being caught as vert lines.

4.
Improve upon an unfortunate O(N^2) algorithm which I have seen taking many minutes to execute.  Unfortunately, while the "fix" reduces algorithmic complexity, it isn't technically correct, so we only do it when we know things will take a long time.

pdfminer/layout.py

@@ -368,9 +368,17 @@ class LTTextLineHorizontal(LTTextLine):
 
     def add(self, obj):
         if isinstance(obj, LTChar) and self.word_margin:
+            # Add a space between words if separated by more than word_margin 
+            # apart.  Use the max of obj width and height so narrow letters 
+            # (i, l) are treated like wider letters, reducing extra spaces
             margin = self.word_margin * max(obj.width, obj.height)
             if self._x1 < obj.x0-margin:
-                LTContainer.add(self, LTAnno(' '))
+                # But only do it if there is not already a space.
+                last_was_alpha = self._objs and \
+                                isinstance(self._objs[-1], LTChar) and \
+                                self._objs[-1]._text == ' '
+                if not last_was_alpha:
+                    LTContainer.add(self, LTAnno(' '))
         self._x1 = obj.x1
         LTTextLine.add(self, obj)
         return
@@ -513,7 +521,9 @@ class LTLayoutContainer(LTContainer):
                           (min(obj0.height, obj1.height) * laparams.line_overlap <
                            obj0.voverlap(obj1)) and
                           (obj0.hdistance(obj1) <
-                           max(obj0.width, obj1.width) * laparams.char_margin))
+                           max(obj0.width, obj1.width) * laparams.char_margin) or
+                           # If the line is zero width, default to horizontal
+                           (max(obj0.width, obj1.width) == 0 and obj1.x0 >= obj0.x0))
                 
                 # valign: obj0 and obj1 is vertically aligned.
                 #
@@ -535,7 +545,10 @@ class LTLayoutContainer(LTContainer):
                           (min(obj0.width, obj1.width) * laparams.line_overlap <
                            obj0.hoverlap(obj1)) and
                           (obj0.vdistance(obj1) <
-                           max(obj0.height, obj1.height) * laparams.char_margin))
+                           max(obj0.height, obj1.height) * laparams.char_margin) and
+                           # Don't start a vertical line if the previous letter is 
+                           # whitspace. Prevents double spaces being caught as vert lines.
+                           (line or obj0._text.strip()))
                 
                 if ((halign and isinstance(line, LTTextLineHorizontal)) or
                     (valign and isinstance(line, LTTextLineVertical))):
@@ -631,8 +644,19 @@ class LTLayoutContainer(LTContainer):
             (c,d,_,_) = t
             return (c,d)
         
-        # XXX this still takes O(n^2)  :(
+        # The algorithm below still takes O(n^2) :(
+        # For now, if we have many boxes, split them into two and perform them 
+        # separately. This will cause bugs, but will prevent hanging.
+        if len(boxes) > 100:
+            boxes = sorted(boxes, key=lambda obj: obj.y0)
+            # Divide in two, then perform grouping
+            # print "Making Recursive Call %d"%len(boxes)
+            bot_boxes = self.group_textboxes(laparams, boxes[:len(boxes)/2])
+            top_boxes = self.group_textboxes(laparams, boxes[len(boxes)/2:])
+            boxes = bot_boxes + top_boxes
+            
         dists = []
+        # Calculate the distance between each box
         for i in xrange(len(boxes)):
             obj1 = boxes[i]
             for j in xrange(i+1, len(boxes)):
@@ -642,16 +666,20 @@ class LTLayoutContainer(LTContainer):
         dists = csort(dists, key=key_obj)
         plane = Plane(self.bbox)
         plane.extend(boxes)
+        # Start with the two closest objects
         while dists:
             (c, d, obj1, obj2) = dists.pop(0)
+            # If there are any objects in between, then skip these two
             if c == 0 and isany(obj1, obj2):
                 dists.append((1, d, obj1, obj2))
                 continue
+            # Group these two closest objects
             if (isinstance(obj1, (LTTextBoxVertical, LTTextGroupTBRL)) or
                 isinstance(obj2, (LTTextBoxVertical, LTTextGroupTBRL))):
                 group = LTTextGroupTBRL([obj1, obj2])
             else:
                 group = LTTextGroupLRTB([obj1, obj2])
+            # Remove the two individual objects
             plane.remove(obj1)
             plane.remove(obj2)
             dists = [ (c,d,obj1,obj2) for (c,d,obj1,obj2) in dists