One of my main sources was enginehistory . org , in the article:
The Rolls-Royce Merlin Aero Engine
by J. SJ. Wells
Regarding the change from Merlin Mk I to Mk II, Quote:
"At Rolls-Royce, instead of taking off their jackets and sorting the Merlin problems out, they chose to simply dust off the old Kestrel, enlarge the capacity to 27 litres and put it back into production using the spurious title, Merlin II."
This article gives an interesting history of the Merlin(s) beginning in 1932, including a discussion of the early, unsuccessful Ramp Head (Mark I) engine, of which only about 175 were produced.
Regarding the tremendous power of the "R" racing engines:
The "R" engines were enormous at 37 liters displacement - around 600 cubic inches larger than the Merlin (which itself was about 300 cubic inches larger than the Kestrel). The R engines were flat-out racing engines - they only had to last for one race, thus they could be tweaked beyond all reason. The "R" engines were run on custom-made blends of fuel while the Merlin was limited to whatever was available in quantity in wartime. According to one source, the "R" engine could have 18 psi boost. The "R" engines were essentially "hand-made" and 19 were produced.