I think that the system could works but need to be a little bit rebalanced: there are not too much merit source in the local community forums also many high ranks do not give merits to people that really deserve them. Ok it is up to us to decide if a post deserve a merit or not but we should encourage people to do better also when they explain a thought that can be different from the one we have.
Also I think the difference between Activity and Merit (in terms of amount) should be leveled. It is very and very difficult to get merits instead of activity so I think the amount of merits people have to receive should be lowered a little bit compared, as said before, to activity.
Maybe but in the end it takes more than a year to become a hero member if i'm not mistaken, 16 months to be precise, so even though it's hard to get merits, it's just as hard to ever reach the activity needed. I personally think that people who receive a lot of merits should get extra smerits to send. For example if you receive 30 merits this month, you should get 30 smerits instead of 15.