My wife hadn't played in months. Started up a game, dug up a chest of sorrows part of the way.... then server merged and lost it.

She hasn't played since, I don't blame her.

No offense but she's either misremembering something, has forgotten some details or lying about that story. Did she get killed by a skeleton midway through digging up the chest?

Server merges should only ever occur when the anchor is dropped & ALL crew members are ON the ship, unless she somehow dug up a Chest of Sorrows on her ship, I'm gonna go with the she was killed by a skeleton & was merged while respawning theory.

I'm only bringing this up because the way you worded it made it sound like she had her shovel in the ground when she got merged, which should be impossible.