In case anyone is interested, Mag and I sorted this one out offline and she was good enough to write a short case study which is well worth a read:
A case study of using LOOKUPs instead of MERGE JOINs
http://blogs.conchango.com/jamiethomson/archive/2005/10/21/2289.aspx
-Jamie
Jamie Thomson
http://sqlblog.com/blogs/jamie_thomson