The default values for IconSpacing and VerticalIconSpacing is -1128 are you unable to set those values in the registry?
1
Click your Start Button, type regedit and hit Enter to open the Registry Editor
Click View and make sure 'Address Bar' is turned on
Paste this into the Address Bar at the top and hit Enter
HKEY_CURRENT_USER\Control Panel\Desktop\WindowMetrics
Please provide a screenshot of that registry editor window.
2
Please highlight all icons on your Desktop and provide a screenshot of the icons on your Desktop indicating the problem you are experiencing with the icon spacing.