There is a TS12 route merge bug - no question. Posts of the "Works for me - you're an idiot" sort don't contribute a great deal to the discussion!
Small and/or simple routes merge in TS12 without issue, but the bigger and/or more complex the route gets the more likely it is to crash while merging.
I don't think that the issue is DEM related per-se, except in so much as DEM routes tend to be large. From previous threads on the subject the rescources of the local computer may also be an issue, two given routes may merge on mine but not on yours. Whatever is broken is I suspect it is hard to chase down, because the crash on your machine is not necessarily repeatable on mine. But I don't therefore doubt that your machine crashes!
Idle thought - do N3V keep a min-spec machine to try things out on? You'd imagine so....