Bugger! Got bored Googling the answer (never done MERGE or INSTEAD OF Triggers before) and thought I'd found it so went for Yes. Only after being told I was wrong did I read the paragraph above the one I took my answer from...
http://technet.microsoft.com/en-us/library/bb510625.aspx
If the target table has an enabled INSTEAD OF trigger defined on it for an insert, update, or delete action performed by a MERGE statement, then it must have an enabled INSTEAD OF trigger for all of the actions specified in the MERGE statement.
Boo hoo! ...as Cher would say... if I could turn back time! 😛
Great question though, I learned something new yet again. All good stuff.
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[font="Comic Sans MS"]"The difficult tasks we do immediately, the impossible takes a little longer"[/font]