I haven't tested this since there was no test data supplied, but I think this should work.

Insert into MergeTable (Project number, IsProjNumConverted)

Select Coalesce(x.proj_id,i.proj_id) as projID,

Case

When x.proj_id is not null then 1

else 0

End Converted

FROM dbo.Incident_Info i

left outer join Repository.dbo.PROJ_ID_XREF x on x.PROJ_ID=i.Proj_ID