AndroidManifest.xml merging is supported in version 20 of the ADT tools:
“Automatic merging of library project manifest files into the including project’s manifest. Enable with the manifestmerger.enabled property.”
http://tools.android.com/download/adt-20-preview
You will need version 20.0.3 or newer to get it to work within Eclipse.
Release notes for ADT 21 preview has this comment:
“Fixed manifest merger to properly adapt library classes in the merged manifest.”
Not sure what this means but may be worth checking out if you are having merge issues.