It's quoting is it's power!
And I fixed shell-mode in emacs for myself with the following:
https://github.com/codemac/config/blob/master/emacs.d/boot.o...
The remaining function to fix is comint-quote-filename - of which you'll see commented out there. It's slightly different from the shell-quote-command override in that it needs to only be enabled during shell-mode and it needs to know when to skip quoting all together.
Don't fear, I'll try to get it working and send it to you (and on my github). I truly enjoy rc and emacs simultaneously, so hopefully any discoveries I make can help you if you'd like them. If not - it sounds like you want to switch to eshell anyways, which could be great (albeit will have bad things as well as it doesn't support i/o redirection).