Eazfuscator.NET is a wonderful tool that also allows both dll merging AND embedding, as well as it's normal obfuscation functions. It also does some neat optimizing on obfuscated code. Instead of messing with ilmerge you just add one class annotation and eazfuscator will do everything for you. It's wonderful!
[assembly: System.Reflection.Obfuscation(Feature = "encrypt symbol names with password PAS$", Exclude = false)]
[assembly: System.Reflection.Obfuscation(Feature = "embed nLog.dll", Exclude = false)]
public class MyClass {
//blah
}