Well, after a long illness I think I'm ready to start merging my weapons and armor mods using http://skyrim.nexusmods.com/mods/37981/?tab=1&navtag=%2Fajax%2Fmoddescription%2F%3Fid%3D37981%26preview%3D&pUp=1. Thing is, I don't think it takes into account MO users. Is there a specific method of installing the mod in question so it'll work properly with MO? Some instructions on how to install and operate this merging mod via MO would be most appreciated.

That isn't a mod in itself. It's a script to use with TES5Edit to help merge your mods. TES5Edit will detect your plugin directory so there should be no problem using this with MO.

I suspect the problem is that TES5Edit selects plugins from the Skyrim\Data folder, but MO keeps mods outside of this folder, so there's nothing to merge. Or can it detect MO's directory?