It really seems as though people are, deliberately or otherwise, misinterpreting the "equal entities" part of the policy. In my opinion, it does not mean the two realms must be equal in size or physical strength. It is not "One realm has 20 regions and the others only has 5, so they're not equal entities!" Merging as equal entities means one realm is not completely dominated and subsumed by the other in the merger - as would be the case with a realm taking over the last few regions of a defeated enemy. Instead the two realms merge into an entity that is something more than each was on its own, as was the case with the formation of Riombara. Each of the original realms has representation in the power structures of the new realm (the representation does not have to be exactly equal). And most importantly, it must be voluntary on both sides. If one side forces the other into it, then it is not a merger of equal entities.
This is all a complicated wording, though. I propose a far simpler interpretation:
The no realm merger rule is an extension of the no strategic secession and no strategic capital move rules. It is essentially a "no strategic realm merger" rule, stating that realms cannot merge together for the sole purpose of having a military or administrative advantage.
Because that's what brought the rule: the two realms that formed Riombara did so to better fight a common enemy.
