I don't know what Arthmoor would do, but the way I see it you're gonna to convert your .esp into an .esm first before you do anything else. Shouldn't you have two .esm by now then start over and do it again until you have two .esm.
The next thing you need do is to espify (mods tab in Wrye Bash) or convert (TES4Gecko) your original .esm (one you want to merge into your updated .esp) into an .esp and then merge that .esp (old .esm) into your newly converted esm (updated esp).
I hope I get it right.
Just make sure you have a backup copy of these plugins in case something goes wrong.
I started out with one esm and one esp. The esp included all the changes I've done to the mod for the past four weeks or so. I then wanted to merge that esp into my esm. It worked well, but I got land tears in the west, in areas I had created with the Heightmap Editor in the esp update. For some reason this new land wouldn't merge into the esm without difficulty.
It's fixed now though. I just smoothed the land tears out manually in the CS. I've also given it an in-game run-through to check those problem areas and it all works like a charm. I still don't get why the new land wouldn't merge well though.
Oh well. It's OK now. Thanks for your suggestions.