Here is the info on their web services:

http://taste.merlot.org/merlottechnology.html#webservices

For simple search, it's a very simple REST interface:

http://taste.merlot.org/MERLOTSimpleMaterialSearchWebService_v1_3.pdf

So it shouldn't be hard.

The main thing is that each user (Moodle site) needs to get a license key from Merlot. I've already applied for a test key from merlot.org. They say it'll take up to three days because currently it's still a manual process.

Finally some more general info regarding integration in LMS systems:

http://taste.merlot.org/lms.html