Well, I won't say it is "standard", because after sentence sandhi, words are still often written together. So, for example, "they (masc. plu.) went" can be:
ते अगच्छन् -> without sandhi, written separate
Or, with sandhi:
तयगच्छन् (written together)
त अगच्छन् (written separate)
तेऽगच्छन् (written together)
It's still a bit messy, I suppose.
I think generally तेऽगच्छन् (or, in some styles: ते ऽगच्छन्) is by far the more common - if not only - option in the case of ए + अ. With other vowels, though, e.g. ते आगच्छन्, I think त आगच्छन् is the most common, but I'm pretty sure you can find तयागच्छन् and maybe even तआगच्छन्.
As I understand it from Whitney §9B:
"a. Native Hindu usage, in manuscripts and inscriptions, treats the whole material of a sentence alike, not separating its words from one another, any more than the syllables of the same word: a final consonant is combined into one written syllable with the initial vowel or consonant or consonants of the following word. It never occurred to the Hindus to space their words in any way, even where the mode of writing admitted such treatment; nor to begin a paragraph on a new line; nor to write one line of verse under another: everything, without exception, is written solid by them, filling the whole page.
c. In Western practice, however, it is almost universally customary to divide paragraphs, to make the lines of verse follow one another, and also to separate the words so far as this can be done without changing the mode of writing them. See Appendix B, where the verse here given so treated."
What this means, as far as I can work out, is that in most (certainly early, originial) Sanskrit manuscripts, there are no spaces at all (or, at least, they are very infrequent). Modern texts do not follow this practice as it's obviously a little less easy. However, as you will know, Sandhi often forces words to be written together, e.g. राम + अत्र = रामात्र. Aditionally, it is common practice - as you know - to merge words together. So, if a word that begins with a vowel follows a word that ends with a consonant, you write them together, e.g.: रूपवान् अश्वकोविदः is perfectly possible, but it's almost universally written रूपवानश्वकोविदः. Also, if a word that begins with a consonant follows a word that ends with a consonant, you write them together (plus sandhi), e.g.: आसीद् राजा is perfectly possible, but it's almost universally written आसीद्राजा. So, the point is, while Western texts could separate the words like that (which is what we do in transliteration: āsīd rājā) it becomes messy when we have something like रामात्र. Of course, we could just leave रामात्र, which is what we do in transliteration (rāmātra (although some people prefer rāmā 'tra)), or we could follow the example of Vedic padapāṭha and maybe have रामा ऽत्र, but still it's difficult. More importantly, though, something like आसीद् राजा looks very different to आसीद्राजा and when we prepare texts, we don't want to make them look too unlike the original, we don't want to fundamentally alter the style or appearance of the original. So, for this reason, wherever words merge in the Sanskrit, we merge them today. However, if you have two words which can easily be separated by spaces and it isn't necessary to write them together, then we use a space for clarity, e.g. नलो नाम.
