Wipe will kill the game, people having to rebuild (we build 3 cities in CBT and in OBT we are at our 5 claim and we are building them by need not because we like to build), also everyone will have claims in green and go in red to fight...against who? The moment a claim will appear in red it will be attacked by everyone for the fun of it, and because they they suffer no repercussion and there is no way for the guy in red to do any notable damage on his attackers
I have no doubt that some people would quit the game if there was a merge/item wipe. But I don't feel it would be as dire as you predict. You see people are already quiting the game in large numbers because a lot of the servers are becoming ghosts towns. Players are so spread out right now with all these different servers. There are other reasons people quit as well but the fact that you can run for miles and never see another living soul is a problem that could be addressed with a merge. I'm guessing you would also get a lot of people coming back for the whole "frenzied landrush" mentality that happens anytime a new server opens as people try to snap up that perfect strategic spot in the world. I wouldn't be surprised if there was a boost in player numbers. Of course I could be wrong, I'm not a mind reader and can only speak for myself.
To your other point, think of Red zones on the map like null sec in Eve online, Better resources, unrestricted PVP, Big wars over those resources. Big PVP guilds will absolutely fight to claim and hold those areas. And the towns could only be attacked during JH, otherwise they would be immune like every other zone. Perhaps you misunderstood my suggestion concerning red rones.