is merit just ok (not great)?

I believe reading the entire sutta in Pali provides context which makes clear what the Buddha means here. https://suttacentral.net/an6.63

I believe that "merit" and "demerit" are close but imprecise translations about what the Buddha is trying to communicate here.

I believe that

"demerit" means something like "action compelled by untamed (carnal) flight or fight impulses to pull towards (greed) or push away (hate)" i.e. Māra-driven actions.

"merit" means something like "action compelled by tamed (spiritual) flight or fight impulses to pull towards (greed) or push away (hate)" i.e. Metta-driven actions

Clearly merit is more skillful than demerit.

However, I believe the Buddha is referring to a special state of being called "abandoning both merit and demerit" (

puññabhāgiyaṁ vā apuññabhāgiyaṁ vā

In the Cittavagga (https://suttacentral.net/dhp33-43), the Buddha makes clear why this is special state:

puññapāpapahīnassa

He says that

(1) When dukkha arises, for those who do NOT go to this place of "abandoning both merit and demerit", understanding does not mature.

and, by contrast,

(2) When dukkha arises, for those who DO go to this place of "abandoning both merit and demerit", fear does not exist.

What precisely is this special state?

Why does this special state promote the maturation of understanding and the extinguishment of fear?

It is neither fight nor flight, but freeze.

It is a state wherein we might enter into the ekaggata so as to best process this experience.

It is a state wherein we might respond to dukkha (notification of misprediction in our predictive model of the world) by seeking to fix the error in our predictive model that gave rise to the notification.

i.e. By seeking to increase our understanding.

Why does fear not exist for those who increase their understanding in this fashion?

Because fear is "uncertainty" in our predictive model of the world. To the extent to which we replace uncertainty with certainty, we become more fearless.

To the extent to which we respond to dukkha by cleansing the āsava which gave rise to it, our predictive model of the world will have less uncertainty. In this fashion, understanding extinguishes fear.

Avijjānirodho, bhikkhave, āsavanirodho.

If we train ourselves to habitually respond to the dukkha of misprediction by going to this place of "abandoning both merit and demerit", we will habitually create the conditions whereby the errors in our predictive model which give rise to and sustain fear, can be corrected.

However, in AN 6.63, the Buddha goes further than this to describe the precise means by which we do surgery on the saṅkhāra to make this change.

He says that contact is the source of both feeling tone and perception.

i.e. the āsava (bad habit which gave rise to the dukkha) is being sustained by a perception and feeling tone which need to be replaced.

UPDATED:

How is the the āsava (saṅkhāra conditioned by avijjā) being sustained by contact, conditioning perception & feeling tone?

My understanding is that our brain predicts sensory experience by means of sensory motor predictions. AKA saṅkhāra. We are constantly predicting sensory experience but we are unconscious of it until we make a misprediction whereupon we experience dukkha.

When we experience dukkha, this is notification of misprediction which should compel us to search for (dhamma vicaya) the saṅkhāra which predicted sensory experience incorrectly with the intention of replacing it with one that predicts sensory experience more correctly. (For a deeper explanation, see Jeff Hawkins’ “A Thousand Brains: A New Theory of Intelligence”.)

Each saṅkhāra (sensory motor prediction) consists of 3 parts: (1) In this place (2) with this aim, (3) make this move. 1&2 can be thought of as “get oriented”. i.e. identify the place in our map of the world which matches the current circumstances.

I ‘think* this “matching process” is what is triggered by “contact”. When we make this connection, it’s like we are bringing order to the chaos of sensory experience by saying “I am here. I am here, I am here, …”. We maintain equanimity by moving through sensory experience by predicting sensory experience correctly in this fashion. So long as our predictions are accurate, we remain equanimous.

saṅkhāra = sam + kara = together (get oriented) + move.

IF (1) “contact” triggers the mapping of “I am here”

and (2) contact conditions “perception” and “feeling tone”

and (3) the dukkha of misprediction arises leading to a loss of equanimity and signifying a predictive error (i.e. this saṅkhāra is āsava),

THEN we should come to a full stop and question contact, perception & feeling tone because one or more of them has led us to dukkha.

I think the error can be with any of the 3 parts of the saṅkhāra:

(1) In this place, (2) with this aim, (3) make this move.

(1) In this place: Error: “I am NOT here”. Rather “I am somewhere else”.

(2) With this aim: Error: My aim is unskillful

(3) Make this move: Error: This move does not lead to the desired aim