Good find there. That should fix merging, but not when there is an incomplete circle and there comes a line.
More on the philosophy around this - I don't know enough of the background to this - but when in center punch mode, would it be ok to center punch the center of any circle segment? Doesn't have to be full circle, like the center of a fillet. I mean, you go into center punch mode deliberately and mark circles. The intention is to make a center punch for all marked circles/segments. So only that should be done, no straight lines or half circles or anything. It is only making spots while in center punch mode. If so, one should rearrange the code so separate out this action, mark the center of the circle segments and ignore everything else.
I wonder if this with Smoothing off should be in the description, the PDF where center punch is described.