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@Soweto888
It's not really a space, more a sort of step where the diameter of the threaded surface gets narrower. You should be able to see it in this photo:
Don't take a file to the hub whatever you do. You'll just waste it. All is not lost, though. Read what Sheldon has to say - the bit under the heading Conventional Freewheel-type Hubs deals with this problem.
http://www.sheldonbrown.com/fixed-conversion.html#freewheelhub