The merge radius of both items and experience orbs do not match how they work in vanilla. In vanilla experience orbs don't merge at all. However, in the default spigot.yml the merge distance is set to 3.

For items the merge distance is the item entities hitbox with 0.5 added to the x and z. In spigot's implementation (line 16-19) the merge distance is the entities hitbox with 2.5 added to all 3 axes.

I believe that, since Spigot is supposed to work like vanilla by default, the standard config values should 0.5 for items. The merge radius for items should also be adjusted to only adjust the x and z.

For experience orbs the check should be disabled completely. Maybe by setting it to -1 in the config and adding a check in the code. 0 wouldn't work since the xp orb would still merge if it directly touches.