Currently when switching hardware for server all shows are marked as unwatched on new setup unless the folder storing all plex files is copied as well (at least I think that works). It would be great if you can back up or export set of shows that individual has watched on plex and move between the server for ease of hardware migration. Also if it is handled at new user level then they list can be compared against new server which is being share and automatically marked shows already watched.
The watched status is saved in the main PMS database. You can just back that up. Or you can manually backup just the watched status.
Is there a way to merge databases since I already have 2 instance with different videos marked as seen on both them. Or do I have to take one as source of truth and manually made updates to other one.
There is no way to automatically do what you want. You will have to manually combine the 2, which can be done using a few basic sql commands.
Early 2021 clean-up: support article available, describing how to migrate view states