This functionality has now been incorporated into upstream iTerm.
Please use the latest iTerm instead of this repo, which will no longer be updated.
This repo contains the patch file used to remove borders and add padding to iTerm2.
Simply run install.sh VERTICAL_PADDING HORIZONTAL_PADDING. In the screenshot above, I'm using 25 for both padding values.
The binary will be at iTerm2/build/Development/iTerm2.app, which you can then move to ~/Applications.