As mentioned, you don't want to CC subsurf prior to a mirror with merge. Once you get that sorted out...
It looks like your model's midline is not at the same location as its origin, meaning that once you mirror it, the margin doesn't get merged (which is probably what you would want.)
Try changing the origin of the model. First, in edit mode, select your "midline" verts (the margin, not really midline in your unmodified mesh) and snap your cursor to this. Then, using the 'n' properties shelf, manually place the Y and Z location of the cursor at 0. Leave edit mode, select your model, shift-ctrl-alt-c origin to 3D cursor, (then alt-g reset position, not strictly necessary but a good idea.) Now your model's origin is properly set at the same X location as the actual verts making up its midline.
In situations like this, it's not uncommon to have a midline that isn't totally vertical like it ought to be. After fixing the origin, consider scaling all of your midline verts to 0 about the center in X axis only. (Snap cursor to center, pivot point cursor, loop select your verts, s x 0.)