But it totally works? Here's a picture of a demoman ragdoll bonemerged over a scout ragdoll, both have removed legs via bodygroups:
http://i.imgur.com/qmWDzjJ.jpg

Provide a way for me to reproduce your issue.

Thanks for the reply. I first notice the issue when I played around with the Vindictus Evy Set. I didn't have this issue when I was playing around with the Evy set last night. Here is a way to replicate my issue.

Download the Vindictus set.

http://test1.login.steam.hlxgame.cc/sharedfiles/filedetails/?id=378273404&searchtext=Vindictus
http://test1.login.steam.hlxgame.cc/sharedfiles/filedetails/?id=378302419
http://test1.login.steam.hlxgame.cc/sharedfiles/filedetails/?id=378307620&searchtext=Vindictus

Spawn a Ragdoll (Evy)
Spawn a bone mergable entity (anything is fine, hair, clothes, pants)
Change the body group of the bone mergable entity
Remember what the changed bodygroup looks like
Bone merge that entity to the ragdoll

If everything work as intended, that entity with the changed bodygroup would be bone merged onto the ragdoll. However, my issue is that the entity didn't change its bodygroup when it was bonemerged.

In case you still don't believe me, here is a comic I made to illustrate my problem.

http://person23423.deviantart.com/art/Bone-Merger-Tool-Is-Broken-515904456?ga_submit_new=10%253A1424658487&ga_type=edit&ga_changes=1&ga_recent=1

Ok, thanks for detailed report, I know what the problem is, gonna fix it in a few minutes.