While I like the idea of a large continent with lots of realms, I have to say that I don't like the merging idea. It would be fiendishly complex process, prone to an insane amount of bugs. It would also require the addition of all kinds of crazy regional restrictions due to council members, lordships, duchies, and other such things.
And on top of all that, you'd completely upset the political landscape of every island. At this point, that would be the death of the game. We'd be better off just closing the world, and opening BattleMaster 2.0.
I think you are being a bit drastic, there.
People have complained about the lack of opportunities on AT since forever. Last time I was on colonies, people complained about the same thing, where one realm/empire had won over everyone. I just left FEI in exactly the same situation, with an empire having won over everyone. On Dwilight, everyone complains about the geography and lack of possibilities. There too, Luria is a behemoth than not even the rest of the continent combined can counter. On BT, everyone agrees that Rio's situation is ridiculous, and the last torture reports I had of Rio nobles showed that they didn't like that situation themselves. I hear similar complaints for EC.
None of the continents, in their current form, seem to please the player base. The desire for greater proximity seems like a consensus to me. Cut up realms into pieces, and players of that realm will be unhappy. Bring realms closer to each other? Not so much. These new neighbors don't need to be enemies. And they represent mutual opportunities, both for support and expansion.
Should such a change be imposed unilaterally? Perhaps not. Sending a survey to the players would be a good idea. I think most would be favorable to the idea, if they understand that we won't be drastically modifying the continents themselves, just mostly bringing them within reach of each other.
