Maybe spacing of only 800-1000 meters would work, but I just think it would mean far too long of a ride for someone coming in from the northern Hills neighbourhoods. And if the spacing is say more like every 2 kms or so (maybe even a bit more, what is it on our existing lines?), people who live in the medium density Centre Street between the stations would find it too long to walk to one of them and then get on.
I still think that the potential silver bullet for all of these issues is to use an Urban Gondola. You ride a couple of escalators from the Eau Claire subway terminal to get on the gondola station, and catch the next car (only having to wait about 20 seconds). A gondola can effortlessly cross the river and climb the hill, and run along Centre Street without the need to take away lanes of traffic or expropriate large amounts of property. Plus, you can move a lot of people, and is a lot cheaper than building a traditional LRT line.
http://gondolaproject.com/