I am wondering though since the Pandora didn't ever have an AltGr key that I know of, how was the user able to get around not having one for when they needed to do an AltGr + Spacebar combo? Was there a toggle to check in the OS that changed another key to AltGr temporarily or was the absence of an AltGr key managed another way?
I don't know what answer you're looking for. The Pandora didn't have an AltGr key. There's absolutely nothing special about that. It's not like AltGr+<key> produces a standard keycode like Alt/shift/ctrl+<key>, AltGr is keyboard/language specific.
AltGr is a key that means "alternate graphic". Press altgr and a corresponding key and some alternate code is produced, which depends entirely on the keyboard (or more exactly, what keyboard the OS thinks is) being used. There was no AltGr+Spacebar because the Pandora didn't have an altgr key. The Fn key effectively acted like an AltGr key, providing the alternate graphics of the Pandora's keyboard. In fact, it could probably have simply been named AltGr (just like the Pyra is going to be) and it would have been the same thing, except with a few extra functions thrown in.
So to really answer your question "how did people press AltGr?" they pressed Fn which provided the same function. More to the specific question "how did they press the AltGr+Spacebard combo?" that particular combo produced a "tab" character, as it is the alternate character written on the keyboard, and they just pressed it.
But that's not what you're looking for. I think the actual question you're trying to ask is "how did people enter "special" keys that would normally be on a full sized "non-English" keyboard that could be accessed by the alternate graphics mode of the keyboard?", and the answer is it used
compose: Fn-enter entered compose mode where users could then hit other characters in sequence to "build" the character they needed.
Alternatively, if someone really wanted to, they could remap the keys however they wanted and add a distinct AltGr key somewhere, for example make Fn-Space a sticky AltGr key and have all the regular keys map their AltGr to whatever their normal keyboard does. You'd run out of keys pretty quickly doing that but it can be done.