Not completely true - the 50 merits would have generted 25 sMerits, and if they were awarded in 2s, then they could be used to generate even more.
Yes but following this hypothetical example, having 25 smerits would be useless because you need 50 to rank up, and you also have almost 50 alts you want to rank up.
I think the point is clear, the higher the requirement, the less cheating the system is possible, because people run out of merits to sent to their alts.