This song shouldn't be touched. At all. Look at what happened on the New Mixes from the Best of 1990-2000. All the life was produced out of those tracks, most notably Gone, the original version of which was one of Bono's most naked vocal perfs.
Mercy is plaintive and searching, which is why it gets the label of dragging on or meandering. Is it necessary for every U2 song to know where it's going? After the radio-friendly conciseness of the last two albums (save COBL), it's refreshing to hear a track that actually goes exploring.
I fully believe that if Bad were to come out right now, it would get pasted with the same types of criticisms (to be honest, I'm not even a fan of the studio version).
The bottom line is that Mercy features guitar work by The Edge that is the most emotional I've heard him play in a LONG time. Bono's vocal goes from a vulnerability to an immense power over the course of the song.
What the blind followers that clutter Interference don't want to admit is that U2 may have clipped a great song from an album. They think that if U2 left it off, there's something incomplete or wrong with it (the same type of thinking that perpetrates the "unfinished" Pop idiocy). Well I can tell you that great bands DO make mistakes or have poor judgement at times. The Beatles opted not to put Harrison's Not Guilty on The White Album, and it's a blistering song that's better than 90% of what's on there now (and we're talking about my second favorite album of all time).
I don't know what The Beatles were thinking, and perhaps there's more to the Mercy removal than an album length issue (Larry, you damned fool!). Maybe they also felt it just didn't jibe with the rest of the Bomb. I hope it can help make the next album better, and point the way towards more complex compositions and recordings.