Third, there should (personal opinion) be a fairer distribution of initial Merit than just the current forum level. Seems unfair otherwise, since there is a huge variation already just within a forum level. Perhaps a combination of current activity, time on the forum, how long the account has been in the current level, and other relevant variables.
The distribution of merit was only to provide the absolute minimum for people to have the rank that they currently have. Since merit isn't actually used for anything than determining that, I think this is fine. What matters more is the distribution of sMerit, the stuff that people actually give away. For that, the formula was based on both rank and activity in the past year.