Indeed, \KVO@temp is then a macro with a delimited parameter text (by a space).
\NeedsTeXFormat{LaTeX2e}[1995/12/01]
\ProvidesPackage{bugaddtokeyval}[2016/10/29 v1.0 LaTeX package]
% Handle package options via "kvoptions"
\RequirePackage{kvoptions}% tested with kvoptions 2016/05/16 v3.12
\DeclareStringOption[0]{bar0}
\AddToKeyvalOption*{bar0}{\typeout{ok}}% ok
\DeclareStringOption[1]{bar1}
\AddToKeyvalOption*{bar1} {\typeout{ok}}% bug!
% \KVO@temp will be defined with a delimited (by a space) parameter text
% hence bug
\ProcessKeyvalOptions*
\endinput
tex file:
% Time-stamp: <29-10-2016 à 09:56:02 CEST>
% the documentation should say that no space is allowed before {<code>}
\documentclass{article}
% tested with kvoptions 2016/05/16 v3.12
\usepackage{bugaddtokeyval}
\begin{document}
\end{document}