That's not a very equivalent comparison. Both "on the borderline" and "on the border line" would be converted into the same syntax tree: "(on (the (border line)))" vs. "(on (the borderline))". In the case of 境界線上, writing it as "kyoukaisen-jou" analyzes it as "(above (line-of (border))" where as "kyoukai senjou" analyzes it as "((above line)-of border)" which is different, and IMO incorrect.
Consider the compound word with particles inserted: 境界線の上 vs. 境界の線上. I think you'll agree that the former is a better representation of what 境界線上 means, and also makes more sense to say, both in the context of the story and generally.
Writing it as "kyoukaisenjou" would just preserve the Japanese spacing, i.e. no spacing. That's fine with me too.