Oh, yes, indeed. That's why I said it wouldn't, meaning PS only wants to save it as a copy with the selection (or something like that). I use v 7, if that makes any difference.

However, I should note that I don't mean I would merge layers normally just out of fun. I was talking about merging them before a web release as a jpeg. No choice but to merge, since jpeg is a single layer 24 bit format, after all. Obviously I store my original work in psd format with all the layers and stuff, only saving them in jpeg or png when the method of release so requires.