The form "Merlin" first appears (as Merlinus) in Geoffrey of Monmouth's History of the Kings of Britain, c. 1136. One suggested reason why Geoffrey didn't latinise the Welsh name more directly as Merdinus is the unfortunate similarity of the latter to the French merde.
I went to school (and had my first ever paid software job) in Caerfyrddin (which can be translated as "Merlin's Field" ), a major town in West Wales.
1: https://www.reddit.com/r/programming/comments/1706e1/myrddin...