Patch from #3 works for me. The default is set as well. Great!
Experiencing the same issues on 11.1.0
As according to the error the issue stems from Drupal/Component/DependencyInjection/Container.php where definitions and arguments of the object with id "term_merge.term_merger" are resolved (as I understand it).
On line 237 in container.php the code $arguments = $this->resolveServicesAndParameters($arguments); resolves the service "event_dispatcher" to a Symfony\Component\EventDispatcher\EventDispatcher.
Though in term_merge\src\TermMerger.php it is specified to use the Drupal\Component\EventDispatcher\ContainerAwareEventDispatcher. However, ContainerAwareEventDispatcher was deprecated as of drupal 10.3.0 ( https://www.drupal.org/node/3376090 → ) in favor of Symfony\Component\EventDispatcher\EventDispatcher. This leads me to suspect that Drupal is resolving EvenDispatcher to the preferred one from Symfony but the module is still specifying to use the Drupal ContainerAwareEventDispatcher.
Changing Drupal\Component\EventDispatcher\ContainerAwareEventDispatche to Symfony\Component\EventDispatcher\EventDispatche as well as ContainerAwareEventDispatcher to EventDispatcher in TermMerger.php resolves the issue.
Great! Couldn't fully track down what was creating the NULL label.
Tested and works like a charm.