You can use other materials for spacers, when I've restored this same type of handle, I've used gasket material from an auto parts store, but I've also used brass shim.
I would not use wood because I can't think of a wood that could be relied upon to take the pressure. Maybe lignum vitae would be OK --- that's the stuff they used to use for bearings in marine engines --- but you probably don't have any of that. Wood would absorb moisture too. Not good. Nope, wouldn't use wood.
The pic is a knife I made maybe 20 years ago, rip - off of one of the old Marbles patterns:-
http://www.bladeforums.com/forums/sh...rble-Woodcraft
I think this pattern was maybe the most popular pre-WWII belt knife in USA. Great knife. I had an original for many years, some misbegotten mongrel thought he needed it more than me.
Anyway, look at the Marbles, couple of different coloured materials as spacers.
The knife I did has the handle on in the same way, but it is stacked leather, and includes brass shim.
I like old Solingen knives, I've got a lot of pocket knives, and I never move without one, but probably the one I carry most is a 1930's Dirlam. Excellent design, excellent performance.