Combat Outposts are units. They represent concentrations of border guard units/strongpoints. They do not have a MP penalty. They must be attacked like any other unit. They can be placed in any DMZ hex.
So para 2.2 is inaccurate when it says;
"The following rules govern border hexes and COs"
In reality the first two bullets really only apply to the border/DMZ hexes.
Thanks for clearing that up.