Personally I merge all duplicates since you get an extra inventory slot and skill upg chance. Inventory slots get really powerful once you get to 40+ since mid-grade stuff can have crazy stats. I used 2*s for awhile until i got enough 3*/4* to replace them. Just get the 2* to like lvl 10 until you can replace them.

If your able to I'd recommend farming ?-4 of the current event quests since it gives a lot of gacha seeds and gifts. You should be able to flush out your team with 3*s pretty quick.