The answer is simple. All the mod assets (textures, scripts, meshes, etc) are copied into the new merge mod. Therefore the original mods are no longer required.
I've recently started using Mod Plugin Standalone. Neovalen is using it in his SR:LE and this is the description what should one do after creating the merge: "Uncheck the source mods in the left pane of Mod Organizer as they are now included in the new mod folder. If there are other plugin files in those mods not included the merge they must be manually copied to the new merged mod."
Isn't that a little odd? Why would you uncheck the mods in the left pane? They often provide more than just the plugins, don't they? I can see why would you then wanted to manually move all the plugins not included in your merge inside but again, wouldn't it be just better to move all the plugins that are used in the new merge in the Optional ESPs in MO and deactivate them this way? Now you shouldn't have to manually transfer anything, no?
Also, is it necessary to load the new merge after all the mods it includes in the left pane? One example from SR:LE page is this:
Files to merge:
Left pane placement:
- ClimatesOfTamriel-Dawnguard-Patch.esp (Project Reality - Climates Of Tamriel)
- ClimatesOfTamriel-Dragonborn-Patch.esp (Project Reality - Climates Of Tamriel)
- ClimatesOfTamriel Falskaar.esp (Falskaar - Climates of Tamriel Patch)
- MintyLightningMod_COT_Patch.esp (Lightning During Thunder Storms - Climates of Tamriel Patch)
The bottom of weather system is higher in mod orded than Lightning During Thunder Storms - CoT Patch which is furter down the line in the guide and as a result the merge would be loaded after CoT but before Lightning During Thunder Storms. Is that not a problem?
- Bottom of Weather Systems section.
The only exception is ESM or ESP files that are not auto-copied from the base mods. Therefore if there is a plugin not included, such as the Cot esm, then it needs to be copied in to keep things together.
As far as the install order vs load order, it does not matter in this case as it's simply a plugin file.