For example does a merciful slashing weapon still count as slashing when determining the effects from DR?
How the damage is dealt- slashing.
Type of damage dealt- non-lethal.
Should work fine, considering Nonlethal makes no mention of what type of damage the weapon is doing (whether piercing, bludgeoning, or slashing). Merely that if using a lethal weapon to do non-lethal, you take a -4 penalty. That's all.