I believe in earlier versions of the firmware the Asus stock NAT loop-back implementation didn't always work as expected hence an alternative implementation (Merlin) was included in the firmware. The trick really is select the one that works for you when attempting to access services on your LAN with the external IP address although to be honest I'm not sure now that there is much difference, both seem to work out for me with my setup.
You might find a bit more detail here;
https://www.snbforums.com/threads/nat-loopback-issue.23799/
If you're not running publicly accessible web services in your LAN such as a web server which you want to access internally using the same DNS name or public IP then this setting is immaterial to you