Yeah, definitely don't skimp on upgrading weapons for Sheva. What I did was have her stick to the handgun and rifle, and I took the shotgun and machine gun stuff, although I later traded up a bit and gave her the machine guns and I used a bit more pistol. Really though, I found that a grenade/shotgun/pistol combination was enough, but if you split up the weapons ammo won't be an issue. The knife also came in quite handy; used it more than I ever did before, and the melee combos will kick the crap out of enemies if you can get it going.
Thanks to online duo mode, with the help of a few Japanese players, I beat the shit out of Mercenaries and now just have the last stage, the prison, to go. I'm not spoiling the name because there's no prison stage in the main game! It's an original stage with a modified boss character, based in a location you'll end up at when you get to the end of the game. Everyone is unlocked but a variation of
spoiler (click to show/hide)
Wesker
. I think Tribal Sheva is the most-interesting of all the Mercs because of her bow. It's got unlimited ammo, extremely fast reload time, and kills all normal enemies in one hit, but the trade off is that there's no aiming reticule! You can also get this weapon to use in the main game, but only Sheva can use it (so after one play-through, you can too since you can then play as Sheva). You can buy it if you upgrade a rifle to the maximum setting.
Duo Mercs is so fucking awesome; with one guy I played with, we kept things going in the seventh (ship) stage for a good 5-7 minutes, getting over 115,000 points. That's still A rank though; I'd really like to know how the people with S and SS got those!
I'd actually love to see more Mercs DLC now, with new stages and some added characters. Another AWESOME option would be letting you use
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Jill and Wesker
in the main game.