It feels strange to me too. As I understand it, the "no merge" clause makes libraries legally unusable by others.
A quick search reveals that the "no merge" clause is found in numerous different software licenses: https://www.google.com/search?q="merge+the+Software+into+any+other+software" My best guess is that the clause was originally written for standalone applications (meaning that you're meant to run the software as-is, without copying its source code into your own, or linking your own software to its binaries). However, somewhere along the way the clause got copied directly into a library license, without the involvement of a lawyer who understands software licensing.
Perhaps @mabe can clarify? He helped at: