Merigall has frequently appeared in both games I've had running in parallel, mainly in the form of Dalb (see Weatherstone, GMG p.217 & p.225). Still, I'd say much of the same behavior I've put forth applies to the genderless form encountered at Amber's Peak.
If in this particular form Merigall choses to join the adventurers and encountered Fear attacks and the players had metagame questions, I can wave away suspicions with vague reference to the Fearless talent, likely to assuage doubts there. That or, as you mentioned, Merigall feigns the effects of fear.
If Broken, Merigall (being a Monster) isn't rules-as-written going to take a Critical Injury. That said, I've presented Merigall as such a master shapeshifter that that is something they can feign as well, at least for a time. After a coup-de-grace or after some time left in a Broken state (depending on the nature of the attack that felled the demon or subsequent damage to its form) I might represent Merigall as dissolving into a pool of mog before that itself evaporates (later to regenerate near one of the demon's offspring).
You could even do this right away as soon as the demon is Broken. It certainly suggests that Merigall isn't what they appear to be, which I'd say serves the story well if the demon allows themself into situations truly dangerous to them.
So there's your question, I guess. Why is Merigall traveling with the adventurers?
(1) Simply because it amuses them? I'd say it likely doesn't amuse them enough to risk spoiling the demon's own illusion, unless that itself causes the kind of trouble Merigall loves to watch (e.g., abandoning them at a critical moment).
(2) Because the demon truly wants the adventurers to succeed in whatever endeavor they're aiming toward at the moment? Then it's likely worth the risk of the illusion being broken. Just because they're revealed to be a demon by "death", or that they come off as much more powerful than at first they seemed due to necessary displays of magical prowess, doesn't mean the adventurers suddenly are privy to its many, many secrets.