I deleted the duplicate thread in the WebHelp category. Seems a better fit here in General. Please don't create more than a single thread for a question as it confuses things and wastes everyone's time in the end.
As for the situation, my guess is that you will need to combine your merged projects into a single larger project first. Then create a CHM from that larger project.
I'm not sure the development team envisioned that folks would ever have a need or desire to compile a Merged WebHelp output into CHM format.
To add to Rick's reply, when you merge you have to point to either a CHM or a webhelp project. You are pointing to webhelp in your projects but then running the script which only understands one project. As you say, the developers involved in the script did not design it to convert merged webhelp.
See www.grainge.org for RoboHelp and Authoring information