I haven't been able to merge midi with selected region since upgrading to L9. It always creates a new region on top of the old unless I choose "merge while in cycle mode". I also tried this on my laptop just now with the same buggy result. I then opened up L8 (on my laptop), checked off merge midi with selected region in the preferecnces and tried it. It worked fine. I then went back to L9 on a whim and found that it is now working! I'll try it in my studio later to see if this fixes it somehow. I imagine since I fixed it haphazardly by going back to L8 that it's a bug that not everyone is experiencing, even though its been happening with me on 2 different computers. Nice to know there's a workaround.