OK, I gave up and refreshed browser window that was greyed out, and the site resumed as if nothing had happened - showing the same old version user account with the 9 unmerged posts remaining.
I tried again, after setting delete_user_max_post_age to 99999 - same result. I then tried merging the other way - same result.
In the end I tried again using the plugin, and this worked perfectly first time, and took only a minute or two.
So, on the evidence at hand, the 2.7 beta 3 Discourse merge function is broken in some way, but the plugin still works.