Possible solution for the whole account level system:
Activity should be the most important thing here but for me only posts 120-130+ (may be higher) characters should be counted for activity. Also, posts in some boards should not be considered in activity calculation. Which one? I think that bitcointalk forum stuff know which ones.
Merit? I think merit should be something like a motivation?/boost? to get higher rank faster but not with unjust advantage for account farmers and 'group of accounts'. Example: Sr. Member: required activity: 240 or required activity: 220 if Required merit is meet (250)
Bad idea. Do you think it is not possible to game this? People can add a couple of meaningless sentences to boost character count. They can also restrict posting to boards which count for activity. This would have absolutely no effect on spammers.
The problems you mentioned with merit are teething problems. They will reduce as merit percolates the system and more and more people are given merits (and get smerits to give away).