I've been waiting months and months for an answer to this. The default image spacing routine in the default WP write post isn't accepted by Cutline, and other than using the theme author's method, there is no simple way to provide white space. Oh well. Ho-hum.
Here's how he does it: http://cutline.tubetorial.com/image-handling-with-cutline/
Unfortunately, if you have a large number of posts with images that you're trying to import to the Cutline theme, you're out of luck. Each will have to be manually coded. Why? I dunno. But I've found no other way to do it.
I haven't found a way to turn off his image spacing method either, although I've searched through the code.
Such is the drudgery of using another's theme.