I'm Grace Note, a Community Manager at Stack Exchange.
I recently did a review of this site for graduation, much like one I did for Code Review. I figured since you guys are asking this, I can drop by with some of the thoughts I had.
This site is... actually pretty strong. I was really impressed with the content I saw when doing the review, and the userbase itself is very strong and you have a nice distribution among the reputation levels that can support an election pretty well. Your traffic was also doing very nicely throughout the end of last year, though it's been oddly flat for the past month.
The main falling point of the site is the question income. It's... not that good. For a site with over 600 days of age, there's only 882 open questions on the site, and the incoming volume rarely hits 2 a day. This really needs to be improved in some fashion - but whether or not the subject can actually produce enough content to satisfy graduation (this is separate a concept from enough content to stay alive), that's an unknown. This site is working independently in every other department while sticking to just the subject - it may be wise to figure if the question volume is something that can be fixed. If it is, then it's quite possible to hit graduation.
You aren't the only "split" topic on the network - even in the realm of gaming, there's also a Poker site we have, though their performance isn't quite at your level. Then you have cases like how Super User, Unix & Linux, and Ask Ubuntu all coexist - sometimes a community works when it breaks out. Breaking Java out of Stack Overflow isn't likely to work very functionally, and we have seen actual attempts to split off topics fail in the private and public betas resulting in shut downs.
But sometimes they do work, and so far Chess looks like one of them.
I don't know how I feel about a merge, but right now I'm leaning on no. This is in spite of the fact that in college, I used to be in the Games club, which was about Chess, Go, Dominion, tons of physical games I'd never heard of, and also a bunch of games that the people in the club had created themselves. They were all pretty fun and we had a sort of gaming culture that was embodied in this club - everything intersected. Logically, the grouping makes sense to me, but we don't really seem to have attracted that same sort of unity here to Stack Exchange. On Stack Exchange, it feels like the gamer cultures don't actually intersect all that much - you have the strong M:tG contingent, then you've got of course the Chess group here, and then a hodgepodge of different tribes that don't mingle as much as we might expect. It may be that as a medium, the internet isn't as conducive to the mixing - in the physical world, you can just move your seat and join a random table with a new game you'd never heard of pretty easily. On the net, there isn't that same drive, since the measures of proximity or time matching aren't present - most people operate on their own agenda and scheduled meetups are easier between associates rather than random folks you don't know. This encourages people on the net to specialize, which isn't to say that it's impossible for the same collectives to happen but it is to say that we aren't getting that kind of collective to happen here.
I feel that a merge, thus, has the potential to threaten the growth of both sites. The most obvious potential outcomes are that Chess's power either becomes completely overshadowed in the umbrella site, destroying its success, or that it overwhelms what is left of B&CG's non-M:tG contingent and the site becomes "Magic and Chess". The communities could fracture pretty easily and overall I can see a lot of ways this can go wrong. The main thing being that Chess has a good thing going for it - I feel that we should see how well that continues before we contemplate merging further.