I think anyone who monkeys with the functionality of normal keys is just asking for trouble, but of course YMMV.
In my opinion it would be better to set up a hotkey of Ctrl-Space or something else easy to hit and bring up a palette, a conflict palette, or just wait for a keystroke.
If you really want the functionality of SpaceLauncher then use it or maybe Karabiner-Elements, otherwise work within Keyboard Maestro's limitations (or put up with clunkiness or worse).
But come on Chris , you know best that this should work pretty well with @noisneil's Multipress macro, for example.
Space long pressed and held opens a palette (for an action) with single key triggers.
So, space + s = launch Safari.
The real problem is that "space" is typed when the key is released, which causes problems when typing fast. But that's also the case when you do it with Karabiner, or SpaceLauncher, or BTT ...