Fair enough. Yet given that idea - that no one should expect all players to know or use exactly the same canon - you seem to be arguing that your interpretation is the correct way. Why not accept that other troupes will have other ideas and move on?
So much medieval literature has been lost due to the combination of manuscript culture's slow production of texts and the ravages of time--especially in England with its iconoclastic experience. That we happen to have gaps in the textual record between earlier works like the Historia Brittonum and later works like Geoffrey's Historia in no way means that characters like Merlin did not appear during that gap.
Which is kind of why I think Damhain-Allaidh may have tried to erase Merlin from the ME History books - the legend of Merlin could be a rallying point for those wizards who did not want to submit to the big D.
Without mass printing, getting rid of the existing written record was quite possibly within Damhain-Allaidh's organisation's scope.
Then came the Order of Hermes and the last Founder, finding scattered folktales but no definitive written record.
Though Merlin's "interfering with Mundanes" would be considered a bad example for the apprentices.
Now I am half wondering why Geoffrey of Monmouth didn't write about the War against Dav'nalleus. Or the Schism War. There must have been some spectacularly blatant special effects here and there.

Now I am half wondering why Geoffrey of Monmouth didn't write about the War against Dav'nalleus. Or the Schism War. There must have been some spectacularly blatant special effects here and there.
Geoff clearly had problems spelling "Myrddin." "Damhain-Allaidh" or even "Dav'nalleus" probably sent the poor guy over the edge.
Well, that's just it - there appears to be no consensus as to why Merlin only started appearing in Arthurian literature in the 12th Century if he actually existed in Mythic Europe. If you want to explain it you need to make something up - earlier accounts are lost, Geoffrey of Monmouth was a magus, the truth was supressed by later wizards etc - so except for accepting the reality of the situation, as far as we can possibly know it, is there another 'correct' interpretation? Other troupes will indeed have other ideas, so why do they opt for those particular ones and not any of the other choices? Presumably they are also settling for what they believe to be most correct or plausible.
I am not really invested in the "issue".
I saw you being troubled and suggested a possible work-around that might reconcile historic mediaeval history with ME status quo. Some other people threw in their two pennies.
Small correction - there is no consensus that Merlin only started appearing in Arthurian literature in the 12th Century in Mythic Europe. So for many of us, no explanation is needed because there is nothing that needs to be explained.
Merlin did show up in Arthurian Litterature before the 12th c. and before Geoffrey on Monmouth - in Mythic Europe anyway.
But if you insist that Merlin didn't show up in earlier litterature, then you need to also answer why the Spider War and the Schism War aren't in the litterature - they were more recent and spectacular enough that they must have been noticed by mundanes.
Or why there are no historical accounts of the Founders - who are just as real or fictional as Merlin.
The story of King Arthur and his court didn't end at all well, neither did Merlin's. Perhaps certain magi saw it as a useful fable to illustrate how not to behave, so it was allowed to circulate. On the other hand, if any mundane wrote about actual events in the history of the Order I imagine they would have been dealt with in some fashion or another. It's established in Lords of Men that magi are pretty good at ensuring the mundane nobility have little clue as to what's going on with the Order or its affairs.