I do not think you`ll have to lengthen the tang if you do not mind the last 3/4 length of the handle being the same material. I have done a few blades with short tangs, and while they aren`t works of art they are holding with no problems. I find it easiest and fastest to baton the handle off with an old knife. Then when you have the blade you can follow any stick-tang handling method.
As for handle materials: pretty much any dry hard wood is good. Old furniture people throw out can be a nice source. If you use wood you forage yourself, hust make sure it is seasoned before you use it. Wet wood will shrink around the steel and likely split. If you split your wood into small bits seasoning will not take so long. Spacers can be made out of many different things as well. I have used coins and plastic from an old lunchbox. Also leather from worn-out belts (although personally I have trouble getting the leather spacers flush with the handle, but that may just be my inadequacy).