-2 Sinister Sabotage
-2 Faerie Duelist
-2 Spell Pierce
+1 Mist-Cloaked
+2 Negate
+1 Dive Down
+1 Metamorphic Alteration
+1 Enchanting Melody
is what I use. It's actually different (I run fewer Merfolk Trickster) but I can't check since MTGA is down or something.
My main complaint with the list here is 3 dive down is mandatory, to me. This deck lives or dies on keeping bullshit creatures with or without Curious Obsession on them. I wouldn't even say no to 4. Metamorphic Alteration has saved me about a billion times, and Enchanting Melody takes control of Krasus-tier bullshit for 4 mana. Metamorphic Alteration can be used offensively and defensively too, which I love. Worst case scenario, you copy your own Tempest Djinn onto a merfolk or Mistcloaked.
EDIT: Also an important rules clarification on why Metamorphic Alteration is so good. You can copy the stupidass hexproof 7/6 trampler onto a creature of yours because it doesn't "target" it "chooses." Also a lot of times it's helpful to target their huge win condition and copy it into a Llanowar Elf they have out. The card is just really good for 1U.
the more I play it the less I use dive down. only once or twice a game tops, if ever. Spell pierce has more value. Im less concerned with saving MY creatures, and more stopping the opp from putting anything down. so I favor the ess captures, and counterspells.
Tricksters are godly. tap a blocker, cancel a flyer for a kill or block, turn off niv, wildgrowth etc. enable 2 mana wiz retorts.
only 2 heralds. you never need 4. you only ever need 1 within 4 turns. And in their absence, duelists and sirens make solid plan Bs.
only 3 djinn for the same reason. you only ever need 1 to finish off a game. and you dont want it in the first 4 turns.
metamorphic alteration. yeah, I totally pioneered that, when I started playing mono-u! but also pulled it out of my deck in favor of Deep freeze. Deep freeze is brutal. Metamorphic alt works better in other deck imho where it has offensive and defensive uses. for us, its mostly offensive. I dont want to turn wildgrowth walker with 5 counters on it... into a mist herald with 5 counters, because thats the only thing I have on the field. etc. I dont want to turn a seraph of the scales into a faerie duelist, which still a 1/2 flyer. nor, a drake into a siren stormtamer, which again is a 1/1 flyer, and potentially a counter spell for anyone with blue mana.
Nor, is there much on MY field I would want to turn a into b. A duelist into a DJinn is about it. Possibly a herald into a Djinn if there is no blockers. But, in that case I already have a djinn on the field, and must already be winning. tricksters are kindof "dead" cards after casting, but a 2/2 wizard is still useful.
Deep freeze on the other hand, shuts down flyers, turns off Niv, shuts down ptermander/adapt, wildgrowth walkers, pelt collector, etc, etc.. it does cost more, which is rough. but its also way more direct. you do make a good point about being able to turn, say a duelist, into a Carnage tyrant to block one. I have seen more of that kind of opposition lately. Maybe I'll give metamorphic another shot.
to further explain the "offensive and defensive uses", I use metamorph in my merfolk deck. And its pure gold there. Jade bearers pump a river sneak, and add a counter on cast. great, but then its a dead 1/1. Even kumena speakers are solid 2/2s,, but lack late game power. Taking Either of those, and turning them into another deep river elite, another river sneak, or another mist binder is pure gold. or, conversely, turning an opponents threat into a useless 1/1 jade bearer, or tribal mist binder/elite.
melody is great, but also expensive. again, deep freeze to just remove that threat is more effective usually.