When the --update-avail option is used, the old information about the packages in available is replaced by the package information contained in the <Packages-file>. This file is found in the top directory of a binary distribution, so Packages files can be found in binary-i386/, contrib/, and non-free/.
Issuing the command:
dpkg --update-avail /home/ftp/stable/binary-i386/Packages
will replace the old available file with the contents of the Packages file found in /home/ftp/stable/binary-i386. This option is intended for use when a new release archive is being used.
The --merge-avail adds the Packages file from another binary tree to the list of available packages. The new information gets combined with the old list, adding information on new packages to the available file. The following commands:
dpkg --clear-avail
dpkg --merge-avail /home/ftp/stable/binary-i386/Packages
dpkg --merge-avail /home/ftp/contrib/Packages
dpkg --merge-avail /home/ftp/non-free/Packages
will create an available file that reflects all three of these areas of the distribution archives.