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The attached script benchmarks the basline (current implementation) against 3 new implementations, as suggested on http://mail.python.org/pipermail/python-ideas/2012-January/013296.html
On my machine, the output is:
 merge_baseline
 per run, min of 3 = 7.527 ms
 
 merge_1
 per run, min of 3 = 9.894 ms
 131.449 % of baseline
 
 merge_2
 per run, min of 3 = 7.948 ms
 105.594 % of baseline
 
 merge_3
 per run, min of 3 = 7.581 ms
 100.716 % of baseline
On this particular input, merge_2 adds 6% of overhead when the key parameter is not used. While merge_3 only adds 1% of overhead, it almost doubles the amount of code. (Which was admittedly not that long to begin with.)
The patch in the previous message is with the merge_2 implementation, which seemed like the best compromise to me.