We do currently support both space and htab as folding delimiters, not sure why it isn't working for you. I just copied the sample into a test and it seems to unfold ok for me. I would suggest maybe you attach a file to this issue exactly as it is when it doesn't unfold properly.
Unfortunately I think the format for vCard 2.1 is quite different in syntax to that of vCard 3 or greater, which makes it quite difficult to support with a single parser. So currently we don't really support vCard versions earlier than 3.0.
You could possibly modify the regular expressions used for parsing (found in the VCardBuilder class) to create a vCard 2.1-specific builder class...
This is really interesting - hopefully we'll be able to support this in ical4j. I suspect this may provide an (additional) incentive to replace the underlying date-time API with something that supports lunar calendars, etc. (e.g. jodatime).
I haven't had much time to investigate this, however if you want to look at an example of using ical4j in Android there is this:
I haven't tried this project recently, but it was parsing and loading calendar files last time I checked. Note that this doesn't use Android services tho, so the initial issue here may be related...