Consulta de mesclagem retornando ORA-30926:incapaz de obter um conjunto estável de linhas nas tabelas de origem

Você provavelmente tem duplicatas nos dados. DISTINCT não garante que você tenha IdToUpdate exclusivo quando você o usa com outras colunas. Ver:

CREATE TABLE #MyTable(IdToUpdate INT, LogSetIdToUpdateTo INT);

INSERT INTO #MyTable VALUES (1,1), (1,2), (2,1),(3,1);

SELECT DISTINCT IdToUpdate, LogSetIdToUpdateTo
FROM #MyTable;

LiveDemo

Você receberá IdToUpdate duas vezes. Verifique seus dados:

with cte AS (
  select distinct nullLogSetId.Id as IdToUpdate,
                  knownLogSetId.LogSetId LogSetIdToUpdateTo
  from MyTable knownLogSetId 
  join MyTable nullLogSetId
    on knownLogSetId.IdentifierType = nullLogSetId.IdentifierType 
   and knownLogSetId.Identifier = nullLogSetId.Identifier 
  where 
    knownLogSetId.IdentifierType = 'DEF'
    and knownLogSetId.LogSetId >= 0 
    and nullLogSetId.LogSetId = -1
)
SELECT IdToUpdate, COUNT(*) AS c
FROM cte
GROUP BY IdToUpdate
HAVING COUNT(*) > 1;

Uma maneira é usar a função de agregação(MAX/MIN) em vez de DISTINCT :

merge into MyTable
using
(

  select nullLogSetId.Id as IdToUpdate,
         MAX(knownLogSetId.LogSetId) AS LogSetIdToUpdateTo 
  from MyTable knownLogSetId 
  join MyTable nullLogSetId
    on knownLogSetId.IdentifierType = nullLogSetId.IdentifierType 
   and knownLogSetId.Identifier = nullLogSetId.Identifier 
  where 
    knownLogSetId.IdentifierType = 'DEF'
    and knownLogSetId.LogSetId >= 0 
    and nullLogSetId.LogSetId = -1
  GROUP BY nullLogSetId.Id
) on (Id = IdToUpdate)
when matched then
update set LogSetId = LogSetIdToUpdateTo