There are a bunch of issues in BP 1.2.9 to do with spaces in user names and other weirdness (for example, in @mentions). BP_ENABLE_USERNAME_COMPATIBILITY_MODE basically tells BP to look up the user name in the URL against the wp_user table’s user_login column. By default, it uses the user_nicename column.
I think the answer might be to change this user’s nicename. What does it look like in the database?