I wonder if someone could explain to me what controls (or how to
control) the space between Chapter and chapter number in my TOC given
the setup I have.
At the moment I get ChapterOne instead of Chapter One, and I do not know
what is causing that.
First of all you don't get space even in the chapter header and as such it passes to TOC.
Adding a space in \setuplabletext will do the trick for both chapter headers and TOC.