$+ is a way to join 2 things together without a space between them, so when you used "return $+ string" it joined them together to see RETURNSTRING used as if it's a command. You could accomplish your goal several ways:

alias spacetest {
  echo -s $space(firstbit)

alias space {
  return $1 $+ next

(2) Or simply do:

//echo -s firstbit $+ next
//echo -s $+(firstbit,next)

(from the editbox you need the 2 slashes, but when this is in a script you don't)

Have a look at some of the links here, especially the box along the right side: https://en.wikichip.org/wiki/mirc/introduction