1. Merfolk already get a big Stealth and EV bonus in water, not to
mention strategical options it opens. Merfolk hardly need an
improvement in water, and outside water. They get very good aptitudes
in a range of skills, and are one of very few Dodging races with above
average HP.
2. Water bonus is easy to justify by saying Merfolk are nimbler in
general (Dodging, Stealth aptitude, also small Dex bonus I believe),
and their fish body is particularly well suited to water. Metal armour
would limit movement.
3. Swimming in heavy armour is generally not easy, which is why it
wasn't very popular among sailors, pirates etc. I don't see why
Merfolk should be different. If I remember correctly, Merfolk have the
second worst Armour aptitude in the game, right after Draconians who
have 200.
b0rsuk