Well said, all of it.  I would also like to add that Newbies and other lower-ranked members shouldn't think that giving merit to merit sources or Legendary members is going to increase their own chances of receiving merits. 

Personally, I don't want anyone I've helped out with merits to merit me back, because 1) It doesn't look good, and people could see it as some sort of kickback (which I've never engaged in), and 2) I don't need merits to rank up or sMerits to give out (usually; sometimes I run low, but not lately). 

If I see a Newbie/Jr. Member who's giving all of his merits to merit sources, it makes me just a wee bit suspicious that they're trying to curry favour, and that could be the case in some instances, or it could genuinely be that they think they're meriting the best posts.  But either way, IMO merits should be "paid forward" to other lower-ranked members who make good posts.  Merits serve as a 'like' on this forum, but everyone knows that they also serve a more important function, and that is to facilitate the ranking up process.