Strangely, he has only two uses. The first is to pick up the Fuel Rod for you, and the second is in the final battle of the game, when he picks up bombs and drops them. (see the related questions)
Actually, Merlin has little to do on Astro Knights Island. He recovers the fuel rod from the dungeon when the robot self-destructs. And he battles Mordred at the very end of the island.
Feed it the robot mouse. Merlin the owl will retrieve the fuel rod for you. Just click Merlin and then the rod.
When you awaken the robot owl Merlin, he flies out of Mordred's lab. In order to get him back, you have to feed him the robot mouse. (chomp)
Merlin the robot owl will follow you in the underground lab once you feed him the robot mouse (ouch). He can retrieve the fuel rod from the dungeon after the robot explodes. Just click on Merlin and then the fuel rod.
You need Merlin the robot owl to retrieve the green fuel rod. Go out of the laboratory and feed him the mouse from the Maid's room. Now he will follow you. Click on Merlin and then the fuel rod and he will get it for you.
Feed the mechanical mouse to the owl Merlin, and he will follow you to the back entrance of the dungeon. When the robot blows up, click on Merlin and then the fuel rod, and he will retrieve it for you.
Merlin the Owl can retrieve it for you. As explained in a lab chart, he will do your bidding...after you feed the mouse to him. Click on Merlin and then click on the fuel rod.
There are no cubes on Astro Knights island. There are ice floes on the Ice Planet, that you jump across to avoid the robot fish.
There is no jail on Astro Knights Island. There is a castle dungeon, where an attacking alien robot is being held after his capture. (see the related question)
When you feed the robot mouse to Merlin the owl, he follows you. If you click on him, then a location, he will go there. This is useful when the fuel rod is out of your reach in the dungeon.
Solve the puzzle door and enter to fight Mordred's robot suit, first as Merlin then as your character. (see related question)
Merlin the mechanical owl will recover the fuel cell for you. Feed him a robot mouse and he will retrieve the dropped fuel cell : point to him, then to it.