Here's a geometric proof. The point
$$B = \frac{Z_1 - iZ_2}{Z_1 - iZ_2}$$
is the image of the point $A = Z_1/Z_2$ under the Möbius transformation
$$\mu(z) = \frac{z - i}{z + i}.$$
That means $A$ is the image of $B$ under the inverse transformation $\mu^{-1}$. You want to show that if $B$ lies on the unit circle, then $A$ lies on the real line. In other words, you want to show that $\mu^{-1}$ sends the unit circle to the real line. This is the same as showing that $\mu$ sends the real line to the unit circle.†
A Möbius transformation sends every circle, and every line, to either a circle or a line. To save ink, let's refer to both circles and lines as generalized circles, on the principle that a line is a "circle of infinite radius." Then we can just say a Möbius transformation sends every generalized circle to another generalized circle.
You can describe a generalized circle completely by listing three different points it passes through. The real line, for example, is the only generalized circle that passes through $-1$, $0$, and $1$. The unit circle is the only generalized circle that passes through $i$, $-1$, and $-i$.
You can show by direct calculation that $\mu$ sends the points $-1$, $0$, and $1$ to the points $i$, $-1$, and $i$, respectively. Since a Möbius transformation sends generalized circles to generalized circles, $\mu$ must send the generalized circle that passes through through $-1$, $0$, and $1$ to the generalized circle that passes through $i$, $-1$, and $-i$. In other words, $\mu$ must send the real line to the unit circle.
† To make this argument airtight, you have to see Möbius transformations as transformations of the extended complex plane: the complex plane plus an extra point $\infty$, which you can think of as the reciprocal of $0$.