How do I use http://www.nexusmods.com/skyrim/mods/52363/?tab=1&navtag=http%3A%2F%2Fwww.nexusmods.com%2Fskyrim%2Fajax%2Fmoddescription%2F%3Fid%3D52363%26preview%3D&pUp=1 whilst using MO? Would I install it into MO's launcher like all the other stuff like Tes5Edit and LOOT? I ask partly because MO stores its saves inside its own unique folder for your character. Also, does it matter if I store the program in the same place as I store LOOT, in my case in my Games folder?

Also, how does it handle merged mods? I've got a ton of armour and weapon mods which I've merged and deactivated, whilst keeping them activated inside my merged files, so would that confuse it?

You can install it anywhere, and whether you have MO or not doesn't really matter. It will let you open save files from any folder. Merged mods won't confuse the tool, it doesn't really pay attention to specific mods anyways, it will list all of your active script threads by script name, not mod name.