it's true that you don't see the FOLD event, and it seems the sit in/sit out actions were the cause of the problem (& like you say, a bug on Merge's part).
However it's quite clear from the events at each street that he isn't involved in the hand (and he's definitely not all-in pre), plus you don't see the SHOWDOWN round at the end, which would surely be the definitive decider as to whether it's a showdown hand or not.
Here's a hand that is showdown, and you see the SHOWDOWN round at the end;
HTML Code:
<game id="35593111-372" starttime="20110604052207" numholecards="2" gametype="2" realmoney="true" data="20110604|Santiago (35593111)|35593111|35593111-372|false">
<players dealer="0">
<player seat="0" nickname="LaimonasLT" balance="$7.26" dealtin="true" />
<player seat="1" nickname="tarantinosQ" balance="$7.06" dealtin="true" />
<player seat="2" nickname="MrSnuggles" balance="$4.00" dealtin="true" />
<player seat="3" nickname="bsik22" balance="$3.30" dealtin="true" />
<player seat="4" nickname="R3G7Nice" balance="$4.72" dealtin="true" />
<player seat="5" nickname="kingpokerz" balance="$4.35" dealtin="true" />
</players>
<round id="BLINDS" sequence="1">
<event sequence="1" type="SMALL_BLIND" timestamp="1307182926591" player="1" amount="0.02"/>
<event sequence="2" type="BIG_BLIND" timestamp="1307182927177" player="2" amount="0.04"/>
</round>
<round id="PREFLOP" sequence="2">
<event sequence="3" type="FOLD" timestamp="1307182930355" player="3"/>
<event sequence="4" type="FOLD" timestamp="1307182934740" player="4"/>
<event sequence="5" type="FOLD" timestamp="1307182935000" player="5"/>
<event sequence="6" type="FOLD" timestamp="1307182946087" player="0"/>
<event sequence="7" type="CALL" timestamp="1307182946491" player="1" amount="0.02"/>
<event sequence="8" type="CHECK" timestamp="1307182950113" player="2"/>
<cards type="HOLE" cards="Ad,5s" player="5" hand="Ace High"/>
</round>
<round id="POSTFLOP" sequence="3">
<event sequence="9" type="CHECK" timestamp="1307182957174" player="1"/>
<event sequence="10" type="CHECK" timestamp="1307182960385" player="2"/>
<cards type="COMMUNITY" cards="8c,6h,Td" hand="Ace High"/>
</round>
<round id="POSTTURN" sequence="4">
<event sequence="11" type="CHECK" timestamp="1307182965592" player="1"/>
<event sequence="12" type="CHECK" timestamp="1307182970560" player="2"/>
<cards type="COMMUNITY" cards="8c,6h,Td,4d" hand="Ace High"/>
</round>
<round id="POSTRIVER" sequence="5">
<event sequence="13" type="BET" timestamp="1307182976746" player="1" amount="0.08"/>
<event sequence="14" type="CALL" timestamp="1307182980327" player="2" amount="0.08"/>
<cards type="COMMUNITY" cards="8c,6h,Td,4d,7c" hand="Eight High Straight"/>
</round>
<round id="SHOWDOWN" sequence="6">
<event sequence="15" type="SHOW" timestamp="1307182980743" player="1"/>
<event sequence="16" type="SHOW" timestamp="1307182981051" player="2"/>
<cards type="SHOWN" cards="5h,3h" player="1"/>
<cards type="SHOWN" cards="9h,3d" player="2"/>
</round>
<round id="END_OF_GAME" sequence="7">
<winner amount="0.23" uncalled="false" potnumber="1" player="2" hand="Ten High Straight" pottype="n"/>
</round>
</game>