Any -ocracy that is done to excess will suffer from the usual problems of excess. You can't have only meritocracy.

The point of meritocracy is that when we already acknowledge that merit really matters, we step out of the way and actually reward and celebrate merit.

For example, if your roof is leaking, you probably want it actually fixed. "Joey fixes all the roofs here--you're gonna hire him," "Our LGBTQIA+ friendly staff is the most diverse in the city!", "Please please please hire us I mean seriously, PLEASE!", "Imma good skeet shooter best at the range so hey howbout I fix your roof" are all not really what you want, fundamentally. You might think it appropriate to be swayed a little bit by any of these things, but the roof needs to get fixed.

The question, then, is are we presently in a situation where we undervalue merit and overvalue other considerations, causing problems for everyone, in which case additional meritocracy is beneficial. Or do we already overvalue merit to the detriment of other important things, in which case it's beneficial to back off?

You're correct that going overboard on trying to meritocratize everything, inventing random standards of "merit" when nothing is obviously needed, will cause problems. But that really isn't what most people are thinking of when they talk about meritocracy, is it?