Dead space is unrecovered wort.
Unrecovered wort is one of many losses that BeerSmith accounts for. In the mash, it's seen as a change in the preboil gravity.
A wide recovery gap is simply more volume in the mash, hence it's not dead space.
You'll see this accounted for as an increased volume of strike water. You can deal with this easily by calculating your mash as if there is no extra space, then simply add the volume of that space to the strike water volume. BeerSmith will recalculate the water ratio and the strike temperature to hit your target temperature.