A whole bunch of edits would need to be made that are probably easy but tedious if you know ASM.
1. The cursor spacing. You would need to update the code which is presumably moving the cursor 16 pixels each time it is moved, to move it only 8 pixels when moved horizontally.
You would also need to figure out the condition when the cursor stops moving horizontally. Is it after a certain number of characters wide, or when it hits a certain X position?
Each of those would need to be considered, and possibly more.
2. Selecting the right character for the space. There's probably a table somewhere like "ABCDEFG..." which indicates which character each slot represents.
If you're lucky it might be "A B C D E..." with the blank spaces represented, but if you're not, if may be only the usable characters. In which case you might have to move the table to a new spot in ROM, and hopefully you have enough room for it.
You would also need to modify some ASM code if the ABCDEFG case is true, to change the dimensions of each line.
But one step at a time. First is to probably find the X and Y coordinates in RAM before you can worry about finding the rest of the stuff.
Look up cheat searching and do a Cheat search for each time you move the cursor.