Upon further reading of the non-POSIX mode of shlex, this behavior is not a bug. See http://docs.python.org/py3k/library/shlex.html?highlight=shlex#parsing-rules

The "'h' w" test case parses correctly according to:
* Closing quotes separate words ("Do"Separate is parsed as "Do" and Separate);

The " 'h' w" test case parses correctly, since the quote is now within a word. The literal whitespace at the beginning is not recognized as whitespace, as it is not a "|". This follows the rule:
* Quote characters are not recognized within words (Do"Not"Separate is parsed as the single word Do"Not"Separate);


I'm closing this issue as invalid. Feel free to reopen if there is an error in my analysis.