I saw a Merlin-powered car at the Lincolnshire Show in the 70's. It could only run for a few mins at a time because of overheating problems. It looked like a grown up version of the Volvo sports car of 'The Saint' fame (Roger Moore, Simon Templar, etc). It had a massive bonnet ending with a RR radiator.
I believe that eventually Rolls Royce caught on to the potential for good publicity and ended up supporting him.
The autobahn story I believe was that the police stopped him not because he was going at incredible speeds, but that they wanted to have a good look (admire) the car!
Finally, I believe the car caught fire and burned out during a visit to Norway.