Poked around the CS wiki, but I couldn't find an answer to this.

Any item in a cell occupied by a merchant NPC that is also owned by said NPC will be available to be sold, assuming they can sell that item, this also extends to items in containers owned by the NPC.

There is a mod-added shop where I want to make the NPC sell the items in their shop (not sure why this wasn't done...), but all the items are set as owned by "Generic Owner". Do I have to manually change all the items to the Merchant NPC? I thought that "Generic Item" ownership was overridden by cell ownership, or is that just for items that are listed as having no owner at all?

I believe it's only for items with no owner at all. "Generic owner" is still an owner.

Now I'm really confused because checking again in the CS, the items have no owner, but are showing up as Generic owner in game!

So confused.

That's interesting. What is the cell ownership set to?

Cell ownership is set to the merchant. And if I use the console to set an item to owned by the merchant, they sell it as expected.

I even tried putting using the CS to put a new item in the shop, with ownership explicitly set to "none" but they won't sell it. But again, if I use the console to set the ownership, then they will.

Its not really a big deal, just...not the behavior I was led to expect.

Specific ownership overrides cell ownership. The reason there are specific merchant containers is that items NOT in a container (say, books on a shelf) that are sold don't respawn. There are a couple stores in Better Cities like this; I just tested one (Corthio's Curiosities) to see what would happen - I bought that daedric mask, went to another cell, waited three days, and went back... and it was still gone.

Merchants appear to require specific ownership before they will sell things. I tried making a shop with multiple merchants in a faction, and assigning ownership of the merchant container to the faction. None of them would sell the contents.