It depends on your expectation of him.
Merlin NP 1 is fine when you're not expecting him to stay on field for long time.
Using him just to buff the Buster DPS, then he left the field from using Taunt, like that.
If you wanted Merlin to stay, then NP 2 is better.
I think people forgot its not simply heal 1000, its heal 1000 for 5 turns in NP 1.
Proto Merlin HP Up only lasts for 3 turns; Merlin's is far easier to stack when you can't finish the fight fast.
1.5k heal for 5 Turns is a good deal even by JP standard, not to mention modern AOE Buster DPS like Kukulkan, Richard, Metatron; all good in helping you keep listening to story of the king that 4.5k heal + 15 stars is a realistic expectation.
About Castoria ... I personally not recommended her unless you leaned to Arts.
JP is at point of 'red, blue and green each have their own method' with the 90++ and gimmick they got, so as time goes Castoria wouldn't be the problem solver for 95% of stage again unless your best hitters are Arts.