That would be interesting; OTL, of course, we have a pretty strong East/West divide in the railroads (in the US, anyways), whereas here you would have this extra North-South divide (especially since a good chunk of the OTL Norfolk Southern's northern trackage might belong to this behemoth...?).
Keep in mind that I had the alliance of smaller lines stay seperate in terms of managerial policies and most other aspects, just have them co-operate to keep traffic moving in order to keep UP and SP (using its Donner Pass line) at bay. In Transport America, Northeastern railroading ended up very differently - New York Central cut down its lines substantially in the 1970s and thus was able to survive, while the Pennsylvania, Reading, Lehigh Valley, Boston and Maine and Ann Arbor were the original portions of Conrail. Milwaukee Road, which had been desperate for a merger since the early 1960s, forced its way into Conrail as well, making Big Blue the first trans-continental line, though across the Northern Plains and Pacific Northwest Conrail plays second fiddle to the Burlington Northern. Erie Lackawanna and Delaware and Hudson are part of the Alliance.
As far as a north-south divide, you'd have to butterfly away the Chessie-Seaboard-L&N deal which created CSX, and also butterfly away Norfolk Southern. Killing NS is easy - Southern gets cold feet because of Norfolk and Western's labour troubles in the end of the 1970s and backs off. N&W would probably then, however, seek to join the alliance - with Chessie all over its territory, Conrail to the north and Southern to the south, they'd have a tough road. Erie Lackawanna wouldn't like that, however - but if you can make Norfolk a bigger international port than OTL, you could make N&W a major player in the alliance. What might help there too is Rock Island getting some coal traffic in the 1980s boom and having it exported, and sending it over N&W rails to Norfolk, which is one of North America's larger bulk export terminals. CSX is harder, because Seaboard and Atlantic Coast Line were two companies fighting for the exact same turf, and Louisville and Nashville was owned in large part by Atlantic Coast Line since the turn of the century. Seaboard System IMO is just about inevitable, but keeping Chessie out of it is possible, though not easy, as they will be slugging it out with N&W, New York Central, Conrail and the Alliance. Tough competition to say the least.
Which is fairly smart, the merger or butterflying it?
The merger itself. BN-ATSF is pretty much an end-to-end merger, and the two have very little overlap in territory, most of it in the Midwest were competition is stiff as it is.
Also, I'm not sure how avoidable the mergers are, although you would probably know better than I do; it seems like sort of just the end of a very long consolidation of US rail service into a few geographical units with relatively limited overlap.
The problem with that is that customer service tends to go to shit, and as the railroads are trying to maximize operating profit, at a time when traffic is growing (which has been pretty much constant since the late 1980s) having only a few lines tends to cause problems with congestion and customer service. It's part of the reason there are now many smaller lines with lots of traffic now, they are largely sucking up the stuff that the big boys can't carry. If you have real competition across markets, customer service becomes more important (you don't want to lose to the other guys, right?) and as you will have at least two mainlines instead of one, your traffic capacity goes up.
My area of expertise on this is the Pacific Northwest, because I worked there as a BN trainman in the early 90s. Once upon a time, there were three separate railroads over the Cascade Range - Northern Pacific, Great Northern and the Milwaukee Road. The merger of Northern Pacific and Great Northern into BN in 1970 eventually led to the Northern Pacific line over Stampede Pass being closed in the mid-1980s, and when Milwaukee Road pulled back from the Pacific Ocean in 1980, BN bought that line too but quickly found it was in too rough a shape. As a result, from 1984 until 1997 - when traffic through the ports of Seattle and Tacoma grew like a friggin' weed - the only paths for traffic were over Stevens Pass or south to Portland and up the Columbia River valley. (Why in the hell BN chose to rely on the steepest pass of the three, I don't know. The Stevens Pass was one I was usually on when working for BN, and it was a single-track, twisty, rather steep route that usually needed helper engines in both directions, not to mention it has an eight-mile-long tunnel in the middle of it.) They rebuilt the Stampede Pass line because of the traffic congestion, and even today its not tall enough for double-stack containers. If there had been a rival to BN in the area, those problems would not have happened - customers would have ditched them quite quickly.