I'm a merbist and think this will be good for both the Merb and Rails communities.
That said, I'm a little afraid it will shaft the other Ruby frameworks (Sinatra, Camping) and possibly straight ruby too. People might make interesting things only compatible with Rails.
When Merb was a pretty big, active minority, it was more compelling to go out of one's way to make interesting libraries (ORMs, gems, etc.) easily compatible with anything ruby.
Now, people might at the least write things specifically setup for use w/ rails in such a way that it's inconvenient to nonrails ruby, and at worst make Rails plugins for things that could be useful libraries for all of Ruby.
Rails is gaining modularity, but I fear Ruby overall might lose it. Even after Rails and Merb merge, rails!=ruby.