Lion only fixed this in the aspect of copying a single folder and pasting it to a location where the folder name already exists. It doesn't appear to offer the merge option if the copied folder has folders enclosed within it.

So kind of useless in the case of merging MyLibrary Contents from a product zip.

I use a little freeware program called Macmerger

 

Just unzip the product to your desktop then run the Product "MyLibrary" folder into the source folder of macmerger and select your content "MyLibrary" folder as the destination and this will merge your new product into your library while retaining all of your current content.

I'd suggest backing up your Content Library before trying but it works for me like a charm.