To be fair, the Hero as a liar has been a tradition since the invention of the Secret Identity. Merlin is supposed to be a superhero with a secret identity, and quite adept at lying and covering up his heroic nature. It's a sign of both his cleverness and humility, that a superhero goes to such great lengths to hide his identity. Even Superman, from the early comics to the Smallville version, always a pure hero who believed in Truth with a capital T, lied to cover his secret identy. (Tho he's fairly unique among heroes in that his secret identity is humble Clark Kent, he tells the truth about himself as an alien hero when not disguised as a human - except in the Smallville version which went the more usual hidden hero identity route)
That being said, Merlin also lies for fun and mischief, and while part of his endearments, that whole bit with the sword didn't work for me either. Arthur is complaining about how gullible he is, so Merlin proves the point.
Yeah, the "unidentifiable" hero, (Homer's tale of Odysseus and Polyphemus of Ancient Greece) or the "mystery" men (the Scarlet Pimpernel, Batman and the Shadow of the 20th Century) were among the first to have a secret identity and present the Hero as liars. Interestingly, these same Heroes were the precursor to if not the direct literary descendents of the Anti-Hero of the 20th Centtury who were heroes that had many traits of the villain. A fact exploited by Marvel comics in the form of J. Jonah Jameson and his hatred for Spiderman from the 60s to the 80s, calling Web head a villain or the times that Marvel tried to make Dr. Doom heroic in the 70s-90s. Believe it or not, Comic Books are a great source for models of the Hero Archetype and their reflection of Post Modernistic Society.
However, the intent of those men with Secret Identities isn't to do harm or be ignoble (though they are because they act outside the conventions of society) but to protect--- either her/himself or others from harm (from the villain, from the hero --- Superman's reluctance to marry because he might lose control of his superpowers and inadvertently harm his wife--- , or from themselves --- the best buddy, wife, girlfriend, etc who might abuse the hero's power through their relationship becoming the very thing the hero would battle,for instance, Green Lantern and Star Sapphire.) But, for each of them, there's some bit of remorse or sorrow that their identity must be kept hidden or that they cannot return to a normal life and outside their secret identity, these Heroes try to minimize their deceptions.
Merlin doesn't. He's quite adept at being dishonest and while endearing, it looked like he enjoyed lying to Arthur and the ease with which he'd done so was disturbing in terms of the true nature of their relationship. That's why, having most of elements of Bruta's tale being intact and known regarding the sword in the store instead of being complete phony, even if it's a tall tale in Camelot, prefacing it as a fairy tale for bedtime in the earlier episode, and relaying the expanded story to Arthur would have made Merlin seem less like a liar.
Third, Merlin doesn't let Arthur take the sword until Arthur has faith in himself. The sword isn't the important thing, the faith is. It's the first step in believing he's part of a bigger world. That part is true, but he needed a nudge to open his eyes to it....
But, that still doesn't give us a plausible reason for why pulling up the sword would give faith to Arthur or provide him with confidence. There had to be a reason: legendary, mythic or bedtime story that would have laid the seeds for that belief--- reinforcing that idea besides having Merlin say so. I'd have been satisfied if anyone had provided some positive reinforcement to Arthur that pulling out the sword made him king. That would have at least hinted that the story wasn't completely made up and provided story lines for the future.
... (I was a bit more upset that he almost lost the battle with Helios while he had Excalibur in hand - Arthur's supposed to be undefeated with that thing)...
No, the real Geoffrey of Monmouth attributed that enchantment to Crocea Mors, the Sword of Julius Caesar, which Geoffrey claimed to have in his possession, granting the wielder invincibility in battle.There were several enchanted swords that Geoffrey claimed to have and Arthur would have at least two--- Excalibur, a sword of war, and Clarent, a sword of peace, which is why Merlin's Tale could have been approached as a tale told to the children of Camelot instead of a complete lie--- Arthur's skeptical at first because it is a bedtime tale but he knows enough of it that he's nudged to believe, and it piques his curiosity because he wonders just how accurate Merlin's version is (giving Arthur a bit more depth as a character). There's enough truth to it but when Merlin tells Arthur about finding it, to Arthur, that's rubbish. But, he comes to accept it's true when people remind him of Bruta's sword and then he knows it true with he sees it for himself. And, in seeing he believes that only the true king can pull the sword from the stone and he doubts himself (adding another layer of depth) but once he does, he regains his faith and he knows he destined to be the true king of Camelot. By so doing, we see the power of myth: to reaffirm and resurrect the commonly held beliefs, traditions, and notions reflecting the morality of a society. It could be inspiring and cathartic instead, it left me felling hollow.
Maybe if I were immersed in the Arthurian tradition of the UK and its commonwealth I might feel differently but I'm from the US and I need that sort of build up to get the emotional kick. But, more likely, it's because of the melodramatic basis of the show. One of the benefits of seeing this show on SyFy is that it's repeated at noon Saturday. What I do is shut my eyes and listen to the audio. If I feel the same about the episode then I keep my original opinion of it. If it's not then I like to find out why. Finally, if I still don't change my mind, I like to read the script if possible and then reassess (This was the only episode of S04 that I had to go that far). Because what's disappointing is that the show could have been so much better. And that's when, I think if a few scenes need to be added to flesh things out and resort to finding what principles of story telling if any were broken and usually there are.
Give it a try sometime. You'll likely find out as I did that some shows are over rated while some are true gems.