If you did not install the CollabNet federation client from the Subclipse update site, you must do so. The Subclipse merge option has not actually been updated to support merge tracking with Subversion 1.5.
The merge options are definitely incorrect. "Go to URL" is not a merge target, your working copy. The From and To URLs are two ranges of URLs / revisions for diff to create the merge that you want to apply to your working copy. In most cases, both URLs should be the same, and version numbers should be changed to reflect the range of changes you want to combine.
The new user interface created with the CollabNet Merge Client solves these problems and simplifies the implementation of the correct merge.
When using Subversion, merging a specific file should be avoided. Ideally, you should combine the whole tree, / branches / appi 1.1 in your example.
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