Merge or not ?

Only thing I would have to say is when you merge to lets say a +1 or +2 you have to face higher level heroes. Also, when you merge in the beginning the 2-4 stats you get are completely random, but at +10 you'll receive +4 stats in everything.

The character you choose depends on what team composition you're trying to run. Personally I believe Fliers/Cavs/Knights are the best compositions and beat out infantry especially at higher levels.

I would probably merge Elincia than Cordelia, and keep Lyn/Neph/Bridal Lyn as 5star 40s for stuff like arena assault and chain challenges ect.

My friend said sometimes it's better to merge when you have like 5 sitting around and can do all 5 at once, but I believe still merging asap is fine as well as it increases your arena score ceiling slightly.

Hope some of that info helped you out :)

The one criteria that I always look at is whether that hero can give a unique skill found only on 5* heroes.
Example - Nephenee has wrath and slaying lance. Two skills that no other heroe has yet = don't merge Nephenee.

Edit: to add on this. You should also look at if you even want to inherit some skills eventually. Flier formation imho isn't really desirable.

Bridal Lyn - No. Her unique skills are too valuable.

Nephenee - She is a great unit but Wrath/Slayer's Lance+ would be gamechanging to some other units. So it really depends on if you have other units who could make good use of them or if you want her as strong as possible.

Elincia - I would merge her but that's because I'm not impressed by Flier Formation - maybe I'm missing something.

Lyn/Cordelia - I would merge her unless you have someone who could really benefit from Galeforce/Brave Lance+.

I would definitely fodder B!Lyn, Nephenee, and Cordelia unless you have already built one or more of those units with bad IVs, in which case merging the bad IV into a better IV is worth it.

With Elincia, Death Blow is a valuable skill and uncommon at 4* unless you love colorless hell. Flyer Formation is probably not super useful but may be worth running as a nasty surprise in a flyer defense team. You could go merge or fodder here depending on your roster and needs.

Lyn I would probably merge unless you're keen to tinker with Galeforce on a unit, in which case I would give the target a brave weapon and both Galeforce and Elincia's DB3.