I use an old, offline machine running linux just for the purposes of offline signing for a couple Armory wallets. All was fine and dandy until I forgot the encryption passphrase for one of them. Not to worry though, right? Because I have the paper backup. So with that encrypted wallet for which I couldn't remember the encryption passphrase still in the list, I "recovered" the same wallet using the root key paper backup. It then gave me 3 options: to cancel, merge, or overwrite (with the text for "merge" saying that it would create a new passphrase). I chose the merge option. It then proceeded to "calculate new addresses" which was pretty processor intensive and ran for about 5-7 minutes. I didn't figure this was an issue and that it was a one-time thing so I didn't think much of it. Then I tried to spend from the wallet. I generated the transaction on an online computer, saved the tx file, loaded the tx file for signing on the offline computer, and then it did the same long processing activity (probably about 5 minutes) and it was finally signed. Saved the signed tx file, went to online computer, broadcast, and it went on without a hitch.
I haven't tried again as I don't have any reason to spend / send again but I'm wondering if I will have to deal with the 5-minute processing every time because I have a "merged" wallet with the passphrase changed.
And now that I think about it, what is the difference, on an offline machine, between a "merged" wallet and an "overwritten" wallet with a new encryption? Seems a bit redundant since the addresses, amounts, and transaction history aren't tracked.
In wallets that are encrypted (should be most of them) it sometimes generates all the addresses from the public keys when it doesn't have your password to generate the private keys with it. In that case, it marks all the private keys to be calculated next time you unlock the wallet, which could be a lot of keys. But once it is done, or won't need to do it again so each subsequent unlock should be much faster