I would also love to see this implemented. What is the status of this enhancement?
I think one easy way to make this work is if you control the merge from the e-mail address. Perhaps what you can do is allow Admin users to key a duplicate e-mail address and if the system sees it as a duplicate, you can offer two options:
"Merge the current record with an existing record (CAUTION: All contact/membership field information from this record will be replaced by the existing record information, but all registration and payment history will be retained)
"This e-mail address is already in use, please provide a unique e-mail address for this record"
The only real issue I can see is if they have already paid and/or applied for a membership on both records. What rule should be used for survival? My suggestion is that the existing record should retain the renewal date the farthest out. So if the record being merge has a renewal date farther out than the existing record, then the existing record should be updated with that renewal date.