So I decided to make a hilarious priest deck focused around summoning The Ancient One. I got the dream of playing Blood of The Ancient One and then using Herald Volazj to copy him the next turn, giving me The Ancient One. Clearly my opponent wasn't as amped as I was about getting hit in the face by a 30/30 so he used Shadow Word: Death on it. Thankfully I was holding my trusty Resurrect and seeing as how The Ancient One was the only minion of mine that died, I was guaranteed to have him Resurrect. Instead, one of my Bloods resurrected instead.
This is pretty shifty wording. There is nothing in the Blood's text that says anything about dying (like in Mimiron's Head), so why does it count as a death? I would figure that it would be the same as Hex or Polymorph instead. Pretty huge letdown for me. Blizz really needs to change the wording on the card so that people don't get confused about it in the future.
I personally think you have a case, but since the word "merge" has no technical definition in the game, there's arguably no more reason to consider it a "transform" effect than there is to consider it a "destroy" effect, which is evidently how it's coded.
If a card functions in a way completely counter-intuitive to its wording and in a way that could reasonably effect its play, it's a bug.
Eh, Hearthstone's always been pretty bad with their wording. Druid of the Claw being a transformation for example, is certainly not a bug but at the same time counter-intuitive to its wording. And like craptasm said there's also no pre-existing definition of "merge" (and I don't think it even really implies they wouldn't die, it's just sort of a coin toss either way).