If I perform the unit tests Fossil is coming with via
<verbatim>
   make test
</verbatim>
then the test run fails with 33 errors concerning merging. The message is:
<verbatim>
  33 errors: merge1-2.1 merge1-2.2 merge1-4.1 merge1-4.2 merge1-7.1 merge1-7.2 merge3-3
  merge3-4 merge3-5 merge3-6 merge3-7 merge3-8 merge3-11 merge3-24 merge3-25 merge3-34
  merge3-35 merge3-44 merge3-45 merge3-54 merge3-55 merge3-64 merge3-65 merge3-74
  merge3-75 merge3-84 merge3-85 merge3-94 merge3-95 merge3-103 merge3-104 merge3-1000
  merge3-1002
</verbatim>

The error output of the failed tests is similar like this:
<verbatim>
  test-3-way-merge t1 t2 t3 t4
  test-3-way-merge t1 t3 t2 t5
    Expected [> 2b 3b 4b 5 6b 7b 8b = 2 3 4c 5c 6c 7 8 <]
         Got [{<<<<<<< BEGIN MERGE CONFLICT} 2b 3b 4b 5 6b 7b 8b = 2 3 4c 5c 6c 7 8 {>>>>>>> END  MERGE CONFLICT}]
    test merge3-1002 FAILED!
</verbatim>

If more information is necessary, please let me know ...