Isabel once asks a very apt question: "Who are you? What are you?" Like Isabel herself, Madame Merle is a mass of contradictions, all hidden underneath a preternaturally smooth, too-flawless shell of composure. She herself is the first to admit that she’s shockingly chipped and damaged underneath this impression of perfection, and that she’s just very good at hiding it. This is actually one of the first things we learn about her, although we don’t see the truth of it until the end of the novel.
What we’d really like to know about Madame Merle is what she was like as a young woman. One would imagine that she was quite splendid – beautiful, intelligent, independent, ambitious… sound familiar? The parallels between Madame Merle and Isabel are striking, and the older woman sees them herself. She even goes as far as to say that Isabel is better than she is.
This comparison helps us imagine what Madame Merle was like as a young woman, and, conversely, helps us imagine what Isabel will be like as an older woman, as, kind of, a worst-case scenario. Madame Merle also fell in love with Osmond when she was young and stuck by him throughout the years, until his corruption infected her own soul. In this way, she’s actually pitiable – Isabel sees at the end of the book that Madame Merle is indeed sadder than herself and has suffered greatly, and that the other woman suffers still, knowing how wicked she has been.
One might see Madame Merle as a cautionary tale for Isabel; we already see Isabel start to develop a Merle-like shell of artificial perfection after her marriage to Osmond, but we hope that her renewed resistance to the domination of her husband’s mind after her trip to Gardencourt will save her from Madame Merle’s fate, which is knowledge of her crimes, loneliness, and exile.