What this treaty then effectively does is it uses a meta-game OOC rule to forcibly prevent players who already peacefully play together from ever peacefully playing together in the future in the same realm.
This statement is false. It is also irrelevant.
First, the treaty does not in any way prevent the *players* from playing together. They can start new characters. They can move their characters to the other realm. Or they can tell the Empire to piss off and do whatever they want. (All of which have different consequences, of course.)
Second, it is even less restrictive than the treaty provisions which mandate that certain characters leave the island entirely, and never return. If you are really concerned about the characters not being allowed to play together, why aren't you complaining about that?
Third, the rules of the game do not, in any way, give you the right to play in any specific realm, with any other specific player, or any other such thing. The Empire could have handed out a list of nobles that were required to be in each realm, and demand it to be permanent, and it would break no rules.
The idea of realm mergers is something on which I have little to say, other than they "feel wrong", but I can't quite explain why.