Not sure how I feel about the wire connection location setting. Merged chests can be used in different ways, where a train station might be East -> West and the connection would look cleaner on the right side, but a train station that is West -> East, the wire connection would look better on the left side of the merged chest. Same with North and South configurations. What does this solve? I would want my wire connections to be closer to the train station and that is not always the case with these "left, right, top, bottom" type settings

Unfortunately it is impossible to have the circuit connection always close to the station if you have both west->east and east->west stations. This mod setting isn't suppose to solve anything, it just gives you possibility to say which one is the best of the bad options for you. I usually go with Center for example

Just to clarify, this particular feature is purely cosmetic, correct?

Yes