Rick has it tough, no doubt. There's no one wholly right decision or path. Rick's erring on the side of caution, which is completely understandable. Rick's suffering because he still feels and still possesses a conscience. I'm not saying I would let Merle come back either--only that Darryl was caught in an impossible situation. Like him or not, Merle is his brother and he raised him. It's going to be impossible for Daryl to just leave him on the side of the road in a walker infested world without seeing direct evidence of treachery.
TPTB aren't stupid. They're not letting go of Norman Reedus.
I doubt that Daryl would have considered that an acceptable compromise.
No lie. Just putting Merle, the brother of a group member, in a cell is still a security risk. Merle would be working on Daryl 24/7 to let him out.