Funny you should mention mergers.

AirTran has made an offer for Midwest, and some say this is going to start a consolidation wave among the LCCs just as the US/DL deal is starting a consolidation wave among the legacy carriers. Southwest may very well end up buying one or more LCCs before all of the dust settles (some have speculated they will take Midwest before AirTran can get it).

Also, keep in mind that Southwest has "merged" in the past. It acquired Morris Air (ironically, started by David Neeleman, the current CEO of JetBlue) in 1993, and Southwest's current arrangement with ATA is a lot closer to a "merger" than normal codeshare relationships between airlines are.

Now, mergers really have nothing to do with "simple, efficient, few if any fees, and friendly." An airline (be it Southwest or another airline) can still provide those attributes regardless of its size. Keep in mind that Southwest carries more passengers per year than any other US airline. So, I'd argue that the size of the airline and the attributes people associate with it are fairly independent.

As for the FF programs, this new wave of mergers is going to reduce capacity industry-wide, and that's going to make FF seats harder to get on any airline, be it Southwest or a legacy airline. Mergers are great for the airline industry but bad for passengers, regardless of whether the airline you like is involved in a merger or not.