As you describe ... I believe that the problem can come from the "signal wire" inside the Merlin ...
The 2 RJ plugs are wired in parallel, could you please try the one and then the other with the hand controler ... If you get the same symptoms, could you control inside the Merlin if one or more wires are disconnected ?
At the RJ connectors you have normally 3 wires:
Ground and VCC are for sure OK ... otherways you will not get the buttons blinking on the remote controler !
Maybe is the signal cable disconnected between the RJ's connectors and the main board in the Merlin !!!
Just a small comment about the BT module that you have used, according the documentation this module is TTL 3.3 V and not TTL 5.0 V like the Merlin ... ( power supply is 5V but not the TTL signals, this could work ... but !!!!)
What about your USB to TTL device ? (Brand & Type ?)
Good luck !!!
-- The same thing happens with the controller plugged into either port. I dont think anything is disconnected internally, but I will have a look to be sure. I purchased the Merlin 2 weeks ago so it is still under warranty. I will email support and see about getting it repaired.
Thanks for your help,
A last thing , BE SURE THAT THE BATTERIES ARE FRESH (or freshly loaded) , a poor battery set give exactly the same problems !!!
P.S. do-you live in North America ?
-- Yes, Texas USA