i apologise if yo've tried this but as i read it you unsuccesfully tried to merge the verts to join the two parts of the car.
i'm guessing it's because you may not have combined the two parts of the car (found in polygon menu). you should then be able to merge the verts with no probs.
looking goood chap, mclarens one of my favs!
a lot of people seem to prefer grouping the different parts although not having tried it myself i couldn't really say the best way to model a car.
problems with sub-d conversion usually show up in the script editor at the bottom right. clicking on the hamburger type icon will give you a very lovely clue and remedy into why the conversion isn't happening.
hope this helps chap.