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When you create an unordered list by using the imagesrc attribute in FrontPage that includes leading whitespace and then optimize your HTML by selecting the HTML leading whitespace option, the leading whitespace is not removed. If you remove the imagesrc attribute, the whitespace is removed as expected.
This issue occurs because the ul imagesrc attribute causes a Table tag to be generated when the HTML is output. It is the output HTML that is then cleaned.
Microsoft has confirmed that this is a bug in the Microsoft products that are listed in the "Applies to" section.