First, note that you are using the correct cookbook. There is one for the original Merlin and a separate one for the Merlin 2.
"Z" refers to the Z (vertical) axis of the Merlin. In the cookbook, it's the number of turns of the guide ring from the fully-tightened position.
Stage mark refers to the position of the edge of the dovetail plate on the stage. Stage marks are different between the two generations of Merlin.
On c.g. dist, from http://www.merlincookbook.com/faqs.php
3. How do I use the ‘Magic Formula?’ and what the heck is the “vertical CG distance?”
Even if your camera does not yet appear in the Cookbook tables, two simple measurements will let you easily obtain your approximate settings. Download and read the ‘Magic Formula Instructions and Diagram’ that accompanies the spreadsheet link. Now determine your camera’s final shooting weight (with tape, accessories, etc.) and its ‘Vertical CG distance’ as instructed. The ‘vertical CG distance’ can be found by experimentally balancing a flat side of your camcorder (or the lens cover or the battery) on your finger and marking that balance point with a grease pencil or a sliver of masking tape; then measure the distance from that mark down to the base of your camcorder. What you have detected is the location, within your camcorder, of the plane of that famous CG point, and additionally how high up from the camera mounting surface that point is located. Note that you have three spreadsheet choices––for zero, one, or two ‘nose weights.’ (If your camera is relatively light, I’d suggest using the latter––the .41 oz (186 gm) version––to provide maximum inertial stability). Now, if you enter those two numbers––weight and vert. CG––in the marked boxes, the blue columns of the spreadsheet will show all possible solutions for balance. The brown column to the right will show the ‘dynamic moment’ of each possible solution––don’t ask, just use the one with the smallest ‘dynamic moment’ number and write down the indicated settings. This will give you a great head start for balancing. You will still need to finish the job, and fine-balance and trim your Merlin as per question #1 above, but you should be quite close!