Helicoils are the way to go. I had to do this to one of my mopeds before.
It is dead easy to do. Here's the steps:
1. Remove the cylinder head.
2. Tap out the old spark plug hole to a larger diameter using the provided tap.
3. Thread in the Helicoil insert with some sealant (sealant not included).
4. Hit the insert a couple of times with the provided tool and a hammer to lock it into place.
5. Put the plug in.
It is super easy to do. However the kits are kind of expensive (I paid CDN$60 for mine at the local NAPA). Lots of motorcycle shops will put in a Helicoil for you for much less than this (I seem to remember them quoting me CDN$30).
You are right that the "spacer" is probably a Helicoil that's come loose (whoever installed it probably forgot to use sealant or didn't hit the insert hard enough during the whacking stage). Look around for Helicoil inserts, and maybe you can avoid having to buy the whole kit.
If you decide to do it yourself let me know and I'll consult my kit and tell you what kind of sealant to use.