Merge meaning, take all the files that were changed, created, added and take the most recent.
We aren't talking version control here.
People I'm sure would be happy with just the most recent of the day.
-Kevin
Based on the thread, I'm not so sure people would be happy with just the most recent. I can imagine lots of horror stories ("i accidentally copied one file over another, and TM didn't magically figure out I really wanted the first version!").
Anyway, TM behaves like I expect *backup* software to behave. I do not want to restore a directory and find it full of a bunch of files that I deleted prior to the backup.
Having read apple's explanation of TM, I think it behaves exactly like they suggest it behaves, and I think the problem is that some people expect it to be some sort of infinite-life trashcan or versioning software, and eliminate any possibility of data loss.
Perhaps the next version of OS X will have file versioning built in to time machine (the plumbing is all there - would have to run in the background like spotlight and keep an eye on fsevents (the internal api) instead of the public api.) Would work much better with ZFS, however, to avoid duplicating constant blocks.
All of this reminds me of VMS - whenever you changed a file you would get a new version (with ;version_number appended). You'd type "purge" to get rid of old stuff. Ah, good times.