I'm also going to be blunt and direct with you, (which you may not like), you guys will most likely not be approved. There's nothing out of line in what the embassy did. Yes, you did the right thing by not lying and telling them upfront that you guys aren't living together. However, such an arrangement is bound to look shady to the CO, married people, especially newly married couples are expected to be living together considering the fact that they both live in the same city. Not living together might have made sense to them if, for instance, one party was living in a different city/country due to work commitment.
I don't doubt the fact that you guys were/are in a genuine relationship, but the fact remains that you guys only got married after his selection (which ordinarily is not a reason for denial on its own), but you plan on having a wedding ceremony later on and are not living together. Where there family members present when the marriage took place? Is this documented in the form of pictures? Did you have pictures/other evidence of you guys being a couple prior to the marriage? Did you attend the interview with all these evidence?
Yes DV selectees may be students in their 20s, but honestly speaking if they're not able to live together and support themselves in their home country, how are they going to support themselves in the US where there's no family network to fall back on? What's to stop them from becoming a public charge in the US which is greatly frowned upon?
Unfortunately, I don't believe contacting them to let them know you guys are now living together will change the likely outcome of a denial. It's bound to seem like a desperate attempt at convincing them your marriage is genuine. However, I hope I'm proved wrong, for your sake and you guys get approved at the end of the day.