I used to merge after every layer was complete when i first started (was useless for when it came to changing things), but my cr-z chop at the moment is across 2 PSD's with 800+ layers on each. My computer is slow as hell though, so i needed the 2 PSD's

Its a bitch when it comes to trying to find a certain layer though, it came to a point that rather than find the layers for the hood, i'd print screen and copy/paste the the whole hood to change it.
I also started naming all my newer layers to help with the organisation, though I would merge more together if i didnt have so many with layer blending options on them.