You can rely on some properties of regular expression matching to make this much simpler than what I've seen so far (unless I'm missing something, of course).

s#"([^|"]*)([|"]|$)#
    ( $2 eq '"' ? '"' : ' ' ) . $1 . $2 #ge;
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Look for a " followed by whatever until you hit " or | or end of line. If you hit ", then you found a matched pair so leave the " in. If you don't, then replace the " with a space. The "g" modifier on the regex then starts where the last match left off. This means you don't need to worry about starting a match at the second " of a matched pair.

        - tye (but my friends call me "Tye")