This DLL (version 2.0+) is required to be available and registered (supplies the "Msm.Merge2" object) for the "MergeModule" command to function. The versions of the interface used by MAKEMSI can be controlled with the "MERGEMOD_DLL_ACCEPTABLE_VERSIONS" macro.
The DLL appears to be installed with WINXP+, you may need to download it for older versions. For whatever reason (known only to MS) this tool can't be distributed by me. Some tools known to install this DLL are: