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I just tried to reproduce this and I can @refer to users that have a space in the title. The url to the users profile should convert the " " to a "-", so "John Smith" becomes http:///users//john-smith/. The user referred to also needs to exist. There can't be a space between the @ and the first character. Comments are not processed dynamically, ie if you @refer to someone that doesn't exist, then at the user so they do exist, the original comment will not pick up that the new user exists and can be legitimately @referred to.
I'm using the latest version from github, v0.7.43. So it's possible that there has been a fix added. What version of askbot are you using?
And what are you seeing when you try to @refer to a user with a space in the user name?