It seems to me that it has always been implicitly assumed around here that the MERGE command would be a substitute for a MySQL-like REPLACE functionality. After rereading the spec it seems that this is not the case. MERGE always operates on two different tables, which REPLACE doesn't do.
That said, what kind of support for insert-or-update-this-row do we want to provide, if any? Should it be a REPLACE command, an extension of the INSERT command, a modication of the MERGE syntax, or something else?