The following works for me both with mkii and mkiv (running Mac OS X 10.6.2).
\starttext
\input "exercise english.tex"
\page
\externalfigure[pictures folder/old friend.jpg][maxwidth=3cm,maxheight=4cm,frame=on]
\stoptext
%%%%%%%%%%
My images are in the « folder » or directory « pictures folder » and my file is called « old friend.jpg », so the command \externalfigure is clever enough (not surprising from an old ConTeXt command…) and doesn't need any double quotes.
However for an \input file I have to say « \input "exercise english.tex" ».
Actually in general I avoid to have spaces in my file names, but I just tried the above in order to understand your question.