Hi krass, merging of coplanar faces is built into the booleans and fillet is using some of the boolean infrastructure to do its work and so also gets the same processing.
I'll see if I can adjust it not to do that for filleting.
re:
> I would like to take this opportunity to ask - what exactly does this option do?
By default a variable radius fillet will have a type of "ease-in/ease-out" transition between radius values like this:
If you have just 2 stations for the variable radius fillet you can turn on that "Linear blend" option to make it have a direct linear interpolation between the radius values: