I have been doing this forever, and I realized I really never ran it by anyone here. Is the procedure represented in this video something I should continue doing?

http://www.youtube.com/watch?v=Z3Ul301GQXM

Thumbs up. If you encounter problems it's almostccertainly from badly made mods.

Depends on the mods you use. For faction, container or other stuff it's an easy way to dynamically create compatibility for your used mods. But without cross checking the automatically created patch with your mods, I wouldn't blindly use it.

If you use Wrye Bash for level list merging, it's also redundant to keep the level lists in the merged patch. Delete Leveled Items & NPC. After that clean and sort the masters of the merged patch.

Hmm. I appreciate the answers. But I have no idea what that means lifestorock. Let me ask you this, if I wasn't going to do those things (delete Leveled Items & NPC, clean and sort the masters of the merged patch) should I not use it?

If two mods edit the leveled list they're already merged by the bashed patch, so you don't need any merged patch with its own leveled list inbetween it. It's not harmful and there's no real point to 'fix' it.