Layouts with <merge> tags are better supported now. As is the case for many other features listed on this page, this requires the rendering target to be set to Android 3.0 since it depends on the various layoutlib improvements Xavier has been working on.
We added preliminary support for <merge> tags in ADT R9, but in ADT R10 many features are improved. In particular:
Similarly, layouts wrapped inside GestureOverlayViews should work better now as well.