I've opened the issue #4292 on this. http://subversion.tigris.org/issues/show_bug.cgi?id=4292
Note that resolving that problem won't help your particular case because it'd also mean that D1/D2's creation would be attempted by the merge and then you'd receive a different tree conflict on that. Ultimately a fully better user experience with this would require tree conflict resolution handling. In this case being able to say "give me the union of the trees and the union of the properties on the directories of the trees," would be helpful to you.
