In actuality, as long as every letter is surrounded by even a very little bit of parchment, or klaf, the megillah or any other scroll is at least minimally kosher.  However, for the beauty of the scroll as well as to provide a place to place one's fingers without touching the writing, all scrolls are meant to have a certain amount of additional margin.  This margin is measured, by the books of Jewish Law, in "finger-breadths" or "etzbaot."  Most scrolls, ie most megillot and prophets, require 2 etzbaot for the top margin and 3 etzbaot for the bottom margin and 1 etzba between columns.

A Torah scroll is special in that it requires larger margins: 3 etzbaot on top, 4 etzbaot on the bottom and 2 etzbaot between columns.  An additional difference between a Torah scroll and other scrolls is that the "finger-breadth" used for measuring the borders on a Torah scroll based on the thumb whereas, according to some opinions, other scrolls' "finger-breadths" are based on the index finger, an approximately 25% reduction.

The authorities differ as to the status of a Megillat Esther.  The Shulchan Oruch, section 691, paragraph 2, lists several ways in which a Megillat Esther must be written like a Torah scroll.  The Magen Avraham, based on the Hagaot Maimoniot and several other early authorities, concludes that this applies to all other aspects of a Megillat Esther -- ie that it must be like a Torah scroll also with regard to its margins.  This ruling is accepted by the majority of halachic authorities.

The Lishkat Hasofer, citing the opinion of the Ra"n, argues against this claim and concludes that the margins of a Megillat Esther are no different than that of any of the other megillot or prophets, and hence only need margins of 2 and 3 etzbaot above and below, and 1 etzba between columns.  However this is a minority opinion.

For the sake of practical application, the measure of a thumb-based etzba ranges from 2cm according to R. Chaim Naeh to 2.5cm according to the Chazon Ish.  Therefore, the maximum required total margins of a Megillat Esther according to the majority ruling of 7 etzbaot should be at least 14cm, or 17.5cm according to the Chazon Ish, and the space between columns should be at least 4cm, or 5cm according to the Chazon Ish.  One is permitted to add to the borders provided the area of text is larger than the sum of the borders.

According to the minority opinion of the Lishkat Hasofer requiring only 5 etzbaot, the total margins of a Megillat Esther would be at least 10cm, or 12.5cm according to the Chazon Ish, and the space between columns should be at least 2cm, or 2.5cm according to the Chazon Ish.  Using the additional leniency of index-finger-based  etzbaot, this figure is further reduced to approximately 7.5cm of borders and 1.5cm between columns, the smallest measurements which maintain the l'chatchila status of the megilla.  Anything less would be considered b'dieved.  Up to 17.5cm, the larger the measurement, the more mehudar the borders (although the overall hiddur of the megilla depends on numerous independent factors).

A popular interpretation is that the size of the borders can be measured proportionally based on the Torah Scroll in the Temple which measured 24 thumb-based etzbaot in total height, giving a ratio of 7/24 for the total margins relative to the overall height of the klaf.   However, the single source for this method of measuring is heavily outweighed by the other opinions and totally rejected by the leading halachic authorities.  A full write-up of the topic will soon be available.  Please contact me for details.