Merged leveled lists deal with combining changes to the same leveled list from multiple plugins that are used when spawning creatures and generating random items. All plugins are equally weighted when merging (last loaded plugin does not get highest priority).
Merged objects deal with combining changes to the stats of an object id if more than one plugin makes changes to the stock object. If only one plugin makes changes, then it's excluded from the merged esp since the change will override the stock entry due to the plugin loading after the stock esm which holds the stock object record. Plugins that load last have priority over other plugins when merging objects - so if two plugins change the same stat, the change from the last loaded one will modify that stat. If the earlier plugin also changes other stats not touched by the one loading last (or any other plugin loading later), then its changes will also be applied.
Changes to the position of the same object reference cannot be merged, the last loaded plugin will always override. And esps can only affect position of references in esms (master plugins) they are dependent one, not other esps. If two plugins add different objects directly to the same cell (i.e. your bottles on the table example), merging objects will not merge them either since the game engine and tools like TESTool always considers objects with unique ids as separate instances.
Merging takes into account both exterior and interior cells. Your better off using Wrye Mash to merge leveled list tho, its method is superior to TESTool.
As weatthin mentioned, merging dialog with TESTool is not recommended - it was developed at a time before extensive knowledge of the inner workings of MW dialog was understood, and should be avoided.
is there a program like i described in a previous post that works by taking a mod on the bottom, and applying the changes to it from the mod above it, and so on? or is this what the cs does?
Check out eeeickythump's http://www.gamesas.com/index.php?/topic/1067443-wip-new-merge-objects-program/. :thumbsup: