Yes it's true - babies sleep better, and for longer, in merino. As babies spend a great deal of the early days sleeping its important they have quality, natural clothing to wear. Using merino against babies skin helps them sleep by regulating there temperature. Skin is a barrier through which virtually all the body's heat is loss or gained. Children find it particularly challenging to regulate temperature - here's the science part - because they have a higher surface area to mass ratio than adults. So that is why choosing merino and natural fibres for sleeping (especially in the early days) is so important.
To try and maintain a constant core temperature regardless of external factures merino wool will trap any heat lost from the body in the fabric surface acting like insulation. Then when the body temperature drops, the heat will be pushed back into the body.
Feeling cold is one of the most commonly overlooked reasons for babies waking during the night. So therefore it makes sense that if they are wraped and sleeping in merino, and it is doing the job of regulating there body temperature, then they will not wake up because they are too cold or too hot. - AND THATS A BEAUTIFUL THING.