Create your single board schematic and .brd file to be panelized. Take a copy of the .brd file and open just that file in Eagle, then run the Panelize function on it from the tools menu. That takes copies of the values of all the component names from the tNames/bNames silkscreen layers, and stuffs them in new layers 125/126 as plain text (so that they don't change when they get copied, because Eagle insists that the real name of every component is unique). Turn off the tNames/bNames layers. Save that file as your input file.
(If you are panelizing within the Eagle size limit, you can just group select and copy the sub-board in that Eagle file. The problem only arises if any of the content falls outside the limited area).
Then run the merge script against that input file with whatever offsets you need for each copy of the board. Open up the output .brd file in Eagle and check that they are all in the right place, tweak the script if necessary and re-run until you are happy. You will see that the text copies of the component names are the same on every sub-board, even though the actual component names have been updated to be unique across the panel. Same with trace net names.
Then load the output file in Eagle and do whatever you need to do to tell your fab that it's a panel (so add v-cut lines, or in my case modify the outline layer and add stamp holes and links, OSH Park style). Eagle will let you do this outside the limited area, as long as you don't try to move any pads.
Finally, save that output file and run the CAM job to create the Gerbers, but make sure that tNames/bNames are excluded from the silkscreen files, and the additional 125/126 layers are included. You can use the free version of ViewMate or the Gerber viewer in KiCad to check the Gerbers. And that's it - currently taking advantage of Seeed's "3 for $1" offer :)
There is a bug in the script in the way that it handles the <settings> section (I've opened and Issue for that on GitHub), but reopening and saving the output in Eagle seem to fix that, at least in Eagle 7.7. Also if you are using a fab who work directly from a .brd file, then they need to know that the silkscreen layers are non-standard.
HTH
Andrew