Today (2015-02-25)
This is valid HTML5 and sends a blank (not a space) to the server:
<option label=" "></option>
Verified validity on http://validator.w3.org/check
Verified behavior with Win7(IE11 IE10 IE9 IE8 FF35 Safari5.1) Ubuntu14.10(Chrome40, FF35) OSX_Yosemite(Safari8, Chrome40) Android(Samsung-Galaxy-S5)
The following also passes validation today, but passes some sort of space character to the server from most browsers (probably not desirable) and a blank on others (Chrome40/Linux passes a blank):
<option> </option>
Previously (2013-08-02)
According to my notes, the non-breaking-space entity inside the option tags shown above produced the following error in 2013:
Error: W3C Markup Validaton Service (Public): The first child option
element of a select element with a required attribute and without a
multiple attribute, and whose size is 1, must have either an empty
value attribute, or must have no text content.
At that time, a regular space was valid XHTML4 and sent a blank (not a space) to the server from every browser:
<option> </option>
Future
It would make my heart glad if the spec was updated to explicitly allow a blank option.  Preferably using the briefest syntax.  Either of the following would be great:
<option />
<option></option>
Test File
<!DOCTYPE html>
<html>
<head>
  <meta http-equiv="Content-Type" content="text/html; charset=UTF-8" />
  <title>Test</title>
</head>
<body>
  <form action="index.html" method="post">
    <select name="sel">
      <option label=" "></option>
    </select>
  </form>
</body>
</html>