I think the Merlin knew that letting Harry slip his leash would make him a more powerful force for good. The White Council can't do anything overt if Harry starts flouting the laws of magic. They'd run afoul of Mab, both as head of the Winter Court and as the enforcer behind the Winter Accords. Harry is already part of Winter and soon will be under the aegis of the White Court's protection. Kicking Harry out and threatening him with the Doom of Damocles is political posturing. The Black Council thinks they can use it to get Ebenezer killed, that's it. They have to recognize that when it comes to Harry, they're toothless.
It's going to suck for them when Ebenezer, as a last act of defiance, wills Harry to be the next Blackstaff.