There should be some sort of vague line even for non-projectors? Perhaps the focal point isn't right for the bulb, try adjusting the position in relation to the reflectors.
I am sure E46 DOT headlamps (h7 based reflector version) have a cutoff line. Any lightsource with more output (like an HID kit) inserted in this style of lamp will always:
raise cutoff line
make cutoff line more fuzzy
give out more light above cutoff
In addtion, HID bulbs tend to create orange hotspots.
Many people here have tried covering up with extra shields around the bottom of bulb to reduce light going up. Results have never ended up looking as OEM, some have been able to decrease glare with alot of effort, and most have either given up, or changed direction to use OEM HID optics.