I have always used and seen used "fanfiction" (or "fanfic" as a short form); separating the words definitely makes it sound more clinical/academic/noob.

And I have to say that for myself, using "fan fiction" puts the emphasis in the wrong place. It's not "mystery fiction, mainstream fiction, fan fiction, science fiction..."; It's not just another classification of the standard understanding of fiction. Eliding the two words makes it clearer that it's not fiction "about the fan" or even "by the fan"--it's a whole different type of writing. (I'd say the division should be more on the order of "poetry, fiction, nonfiction, scripts, fanfiction, essays....)