Simple deletion of files using text file list won't work
That error is expected. There is no full path leading to the directory containing the files within remove.txt. Thus, when you run rm $(cat /Volumes/space1/remove.txt) outside of the directory these files reside in, you get that error.

Simply run:

cd /Volumes/space1; rm `cat remove.txt`


Or modify the remove.txt file to include the full path.