I'm pretty sure you can set this up but I'm wondering why would you want or need to do that? MS replication is messy as it is... you're always going to be pushing it by making it more complicated than it needs to be.
If you just want to get the same data to Server3, you could set up a merge replication directly to server 1 but somehow I think there's something else going on.
If its a management request, I always tell them that whatever they want to do is probably possible if they want to spend the money. Then I tell them how much it could cost and that usually stops things right there. You may have some luck with it though and have it work great but I sense a couple of support calls to Microsoft when the ****e hits the fan. I did have merge replication running to four separate locations pretty well. I did, however, need one support call to MS which after weeks of lower level support, my call finally got escalated to one of the pros who had a work around for me in less than a minute. We were using transactional replication and having problems with it which I found out had known issues. So the tech told me to change to merge replication and set the merge time to one (1) minute which worked fine for us and we had no problems after that.
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