I am not convinced that this would work. On paper it does make sense, but when you start to look at the practicalities of it, I think it starts to fall apart. In reality, people who follow these types of club are not really motivated by success or prestige - they just like following their local team.
If for example Alloa & Stirling Albion were to merge, lets be realistic - the resulting club would still be an absolute minnow, and would p iss off fans of both of the legacy clubs. Same could be said if any of the following were to merge -
Forfar, Arbroath & Montrose
Cowdenbeath & Kelty
Raith & East Fife
Annan & Queen of the south
Albion Rovers & Airdrie Utd
not to mention the fact that other clubs who are even more small and pointless than any in this list would potentially be spared the ignominy of being merged just because there are not any other clubs geographically close enough to them for it to be viable (Elgin, Stranraer, Peterhead)
Lets also not forget the roles which smaller provincial clubs play in their local communities in terms of youth coaching, school visits, community trusts etc. Merging clubs would likely lead to these sorts of thing being spread a lot thinner.
The argument that merging together smaller clubs to make stronger & better supported teams is to me a bit like saying "lets merge Rangers & Celtic/ Hearts & Hibs / Dundee & Dundee United to create stronger clubs" - we all know that this idea is a non-starter because the OVERWHELMING majority of supporters of these teams would rather stay at home or go to the shops with the missus than watch some sort of frankenstein club. I don't see any reason to assume that supporters of small clubs would view things any differently