During my endless journey back from FOSDEM (24 hours stuck in airports, taxi and trains because of one of the largest blizzards in Italy ever), I've been briefly working on the design for both live merge and storage live migration:
http://www.ovirt.org/wiki/Features/Design/LiveMerge http://www.ovirt.org/wiki/Features/Design/StorageLiveMigration
They're far for being complete but I'm not able to do anything better now.
Please review if you're interested, the general idea should be correct even though there are several unfinished parts.