I got a response back from Product Marketing via Support:
"The merge engine in question is referring to the email merge engine which is responsible for compiling email content at the time of execution. As an example, you might design an email with a field merge, dynamic content, etc. Depending on which contact is being sent the email, we pull in the appropriate data to personalize the content, which is essentially done by the email merge engine. There were optimizations to the engine to help speed up the creation of emails at execution time. I hope this helps clarify things.”
So, we're back to square one. I'll keep hunting for a best practice solution. It would seem to me that the CRM is the place to manage these issues.