Thanks a lot, Erel,
we are getting closer. The merged dll containing solely device targeting dlls can now be created.
Last problem, when attempting to run the app on the device with the merged dll, I see an error:
Error loading program. File or assemby name 'System.Windows.Forms, Version=2.0.0.0..blah blah...or one of its dependencies, was not found.
Is there something like a Microsoft.Windows.Forms.dll that ilmerge is missing?