"mer" (or "mir", "mia", "ma") for "wir" indicates a southern dialect (Allemannic or Bavarian, i.e. from Austria, Bavaria, Switzerland or Baden-Wurttemberg).
Not necessarily. I can't speak for the whole area I live in, but I personally often use "ma(r)" instead of "wir" (actually 'wa[r]'):
Schauma
r ma' - Schauen wir einmal. (I have to write the 'r' because 'ma' meaning 'wir' sounds different from 'ma' meaning 'mal')
Hammar no' was übrich? - Haben wir noch etwas übrig?
Wo(ll)mmar nich' bald ma' los? - Wollen wir nicht bald einmal los(gehen)?
In spoken German, is there any difficulty distinguishing between mer/mir/mia and mir (as in Dativ)? Or is it usually clear due to context?
I don't say "mir" for "wir," but I use it for the dative case of the subject "I". Nevertheless, it's hard to distinguish my "mar" (= mir) from "mar" (= wir). It can lead to confusion when you begin a sentence with the dative pronoun:
Mar müss'n ma' in'n Gart'n. (Wir müssen einmal in den Garten [gehen])
If you only hear "mar müss'n," you can also think of "mir müssen" as in "Mir müssen die gar nichts sagen." It's much clearer with "kommen:"
Mar komm'n de nich' ins Haus! (Mir kommen die [Katzen, Leute, Flöhe] nicht ins Haus)
If you only hear "mar komm'n," you can also think of "wir kommen."
