How do I turn a traced and expanded image back to a single layered image? I'm new to Ai.
The Layers Panel in Illustrator is fundamentally different than the layers panel in Photoshop. Illustrator's layers panels is actually a "layers and objects panel" which not only shows layers, but shows the objects on that layer. So, within Illustrator there's no such thing as "one layer" if your document has more than one object. Seeing multiple objects in the Layers Panel inside Illustrator is just how the application works and is not an inherent issue. It's the difference between layers in a vector application as opposed to pixel layers in a raster application.
If seeing object levels really bothers you, you can change what the Layers Panel shows by choosing Panel Options from the Layers Panel Menu and ticking the
Show Layers Only option.
This will stop showing you objects and groups and only show layers and sublayers. This does not change the artwork or how it is constructed, only what is visible in the Layers Panel.
The merge function in in pathfinder can sometimes crate some weird results and doesn't always work for what you want it to do. From what you are describing, the Shape Builder tool would be your best bet. Here is a tutorial from Adobe on how to use it: https://helpx.adobe.com/illustrator/using/creating-shapes-shape-builder-tool.html