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What is the difference between merit and virtue from a Buddhist standpoint?
You might find this essay helpful:
If I can summarise its Introduction:
The highest form of merit [is] the realization of stream-entry, the first glimpse of the deathless
Merit (puñña) is one of the least known and least appreciated in the West. ... perhaps because the pursuit of merit seems to be a lowly practice, focused on getting and "selfing"
The section on merit then sets out in general terms the types of meritorious activities that conduce to that happiness, focusing primarily on three: giving, virtue, and meditation.
In the course of developing a wise sense of self in the pursuit of merit, one is already learning how to let go of unwise ways of "selfing" as one learns to overcome stinginess, apathy, and hard-heartedness through the development of giving, virtue, and good will.
Conversely I think that a characteristic of stream-entry is
He/she is endowed with virtues that are appealing to the noble ones
Which is better from a karmic perspective?
That may be a trick question, i.e. because it's the "ending of kamma" that's described as Noble.
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There is no "versus" as virtue is one of the 10 kind of merits.
It's just because Brahmans (using the Gems) teach only the Generosity section as merits, without the base (virtue), that some think it's not of use, but actually for all required, if desiring upwardly and/or beyond.
People with troubles with merits are hopeless far away from any good. Puñña means "doing what's merits (real) joy": fruits, and so often "ku-sala" is added "bad-cutting-off work/labor/sacrifices": in the "puññakiriyavatthu" area of good deeds.
Without right joy (from giving, not from consuming), no way toward liberation or what merits toward it.
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Fascinating question!
Merit is for those seeking pleasure:
AN10.91:23.1: In the same way, the pleasure seeker who seeks wealth using legitimate, non-coercive means, who makes themselves happy and pleased, and shares it and makes merit, and who uses that wealth untied, uninfatuated, unattached, seeing the drawbacks, and understanding the escape is the foremost, best, chief, highest, and finest of the ten.”
And if we can agree that the Buddha is virtuous, we see that the Buddha has gone beyond pleasure seekers:
AN4.246:1.1: “Mendicants, there are these four ways of lying down.
AN4.246:1.2: What four?
AN4.246:1.3: The ways a corpse, a pleasure seeker, a lion, and a Realized One lie down.
...
AN4.246:4.1: And how does a Realized One lie down?
AN4.246:4.2: It’s when a Realized One, quite secluded from sensual pleasures, secluded from unskillful qualities, enters and remains in the first absorption … second absorption … third absorption … fourth absorption.
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Today people at large copy-steal Dhamma and used to only conduct akusala, they think they can gain good for themselves and others, doing shares of what isn't their, thinking "no need of doing of what merits". So did it happen that no good is perceived by doing just "akusala puñña". Living along fools not used to go benefical, living among thieves, rejoicing in evil, it's not possible to even conduct low merits, as virtue is base of even benefical giving. Not related to the wise, but in union with marxist, anarchist and thieves, the vegi eating pyjama Buddhists just heed toward poorness and confussion, shine ugly from far and become prisoned slaves of the religion.
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Some people have no trouble accepting the teaching on merit. Maybe they see some value in it (like you do with virtue) and therefore don't question it.
For those who do have some trouble accepting the idea of merit, here are a few thoughts:
From the etymology of the Latin word merit, we get: "To get a share in something." The something is the act that is done, the share is the reward that the doer gets. It's a karmic reward, that is, your good deed has a good shaping effect on your own mind, if you do it consciously and willingly.
If I remember correctly, the Pali word for merit (puñña) can also be translated as righteousness or goodness. So you could think of an act of merit as being similar to the practice of mettā (goodwill), but having a different form of expression: verbally or physically, rather than only in thought.
puñña: Merit; worth; the inner sense of well-being that comes from having acted rightly or well and that enables one to continue acting well.
PS. From a recent talk by Thanissaro Bhikku:
You’ve learned from your practice that generosity and virtue… that those activities in and of themselves are happy activities. We read all too often about the rewards that come over the long term: The rewards of being generous, the rewards of being virtuous. But as you practice them you begin to realize, in and of themselves, there’s a sense of wellbeing. The Buddha himself said that acts of merit is another word for happiness. The actual doing—in and of itself—is a happy doing.