This would be akin to everyone being able to print their own money and trying to get others to accept it. With a few select currencies, it's easy for them to succeed. With thousands to choose from, people aren't going to accept every type of payment someone thinks up.
This is already true (and has always been), as anybody can start up their own blockchain. The challenge is still to try to get other people use it (not just mine it). The only difference with merged mining is that any blockchain can now be just as secure as bitcoin, but that doesn't make then as valuable.
It's like we are building this huge proof of work machine, and any future application that wants to use blockchains (and there will be many, not just currencies), can just tap in to existing hashing power. They don't even have to provide much (or at all) financial incentive for miners, as for them there is no downside in adding another blockchain to hash. It only needs to be for something a big part of miners would support for one reason or another, and you get your hashing power.
I see this as strengthening the whole idea of virtual currencies, as it kind of levels the playing field for everyone. Sure, it might eventually devalue BTC (or not), but only if some other virtual currency takes its place because it's thought to be better than BTC for some reason. I see no problem with that.