You seem to have gathered all the positive aspects of the merit system, and if it works, we will get exactly what you have described, and that is a good thing. I do have one concern about the system, that I have already posted in the "Merit & new rank requirements" thread.
Since you decided to use your thread to make a comment on some popular concerns, I will leave a link to my post and I hope I can hear your opinion about it, because my concern is not on your list.
Like I said in that post (link bellow), I do believe that this system will give us the ability to judge content, and that is a good thing, but since it's hard to get sMerit points to spend, we might lose the ability to give Merit over time. Even if we don't lose that ability, since we get half the Merit we receive as sMerit, we might end up "censuring" some content.
I will try to explain this part better, so I don't get misinterpreted:
If I give merit to you, that means that I like what you wrote, and this probably means that we are similar somehow. Now you have more sMerit to spend, and since we probably have a few things in common, chances are that you will give merit so something that I also like. Even without knowing it, we are probably promoting similar content. I don't think this is a stupid thought, and part of the "matchmaking systems", and "content suggestions" from google, facebook etc, are based on this principle (people like similar things, and they end up rating similar things the same way, and you can match them that way).
So this leads to the problem I've mentioned. If we have a small number of merit sources, and if a user doesn't have a chance to get sMerit by himself, in order to keep promoting the content he likes, we might end up "killing" diversity without even knowing it.
Don't know if I was clear with my thoughts, and if this makes any sense to you, but I would like to hear your opinion about it.
Here is the link to the post I've mentioned (with a few suggestions to minimize the problem I've mentioned):
https://bitcointalksearch.org/topic/m.28980629