IMHO, Merle simply does not have a moral character. I wouldn't call him 'evil'. He is doing what it takes to survive and is being led by someone who I would consider evil, the Guv. He is a sociopath and likely was one pre ZA. Sure, he's 'protecting' the people of Woodbury but his motives are not benevolent. He only seeks to control the residents to the point where he actively seeks out threats to his power ie: the Ntl. Guardsmen. His town was fortified. He didn't need their equipment, he just wanted them gone and had his men murder them. Merle knows that no one leaves Woodbury alive and has acted accordingly in order to survive. He certainly wanted out (if only to find Daryl) but had no mechanism by which to escape until Maggie and Glenn came along. As despicable as the beating/assault on those two was, it's the only way Merle saw to find his brother. And, it worked! Merle is a bully. Bullies are cowards and rarely do the right thing. In this case, I think his cowardice will be his ultimate downfall. I don't think he'll last 3 more episodes unless the group has a change of heart and I find that unlikely.
+1 Great assessment. However I always saw Merle's end as him sacrificing himself for his brother. Daryl said "no one could kill Merle but Merle", which so far we see to be true, so whenever Merle does die I always imagined it to be on his own terms.