To expand a smidgeon on Brett's comment, when you use xp_cmdshell instead of BULK INSERT you have to play by the rules of the command line instead of the rules of the GUI. Command line tools require that file or path names with spaces in them be enclosed in quotation marks, otherwise the command line parser gets crabby.
As I understand it, windows limits file paths to 255 characters, which is respected by BCP (can dig out where I read this if necessary, probably BoL), so I don't think the length is a problem.
Interestingly these both worK:
SET @file = 'C:\test\test.csv'
SET @file = 'C:\test 2\test.csv'
Go find the file using Windows Exploder, then double check the path. Once you are sure of the path (I'd recommend using Cut-and-Paste) then I'd try to do a directory of it using xp_cmdshell to see what you get.