Letting units replenish automatically is a nice, hands off option and I use it most of the time. The overall XP level of a unit can be reduced if it's heavily depleted and allowed to replenish by this method. That strongly implies XP is tracked on a per-man basis, same as the older games. In turn, that means each man has his own personal stats, and the displayed XP level is an average. Thus a 5XP unit will not have all men fighting at 5Xp's stats. Some will be lower, most will be at that level some may be higher.

I rarely merge units. It's a pain if your units have upgrades derived from recruitment location; it's easier and quicker to let reinforcements trickle in to a unit than it is to recruit a new unit from a province which gives upgrades and then walk it over to join the army.