There is a judo-like technique in plotting, where you just go with it.
Right now your plot is that Merlin is a good guy who wants them to steal Excalibur and hand it over to some wet tart and/or stick it in a rock somewhere because the king is not worthy.
Now this opens up decision points for the players. Sketch them out.
The goal is to make every decision point result in an awesome story. And it doesn't have to be the same one, it just has to be consistent with what they have experienced.
Possibilities:
- Merlin is evil/fooled
- The knights are evil/fooled
- Excalibur requires worthiness/does not require worthiness
- Excalibur is actually just a sword
- A story about worthy knights doing the honorable thing
- A story about knights falling to temptation, and redeeming
- A story about scoundrels doing what they can for power, and writing history that they are heros
- A story about knights falling to temptation, and disaster
A way you can play Judo with the players is to give them some free choice (return the sword or not?). When they make a choice, drop a hint somehow that they made the right one. Then offer the choice again. They'll probably make the same choice.
So suppose they kept the sword. Drop a hint that Merlin was actually enslaved to Morgan and this was all a way for Morgan to steal the sword! (Maybe one of Morgan's minions tries to get them to hand the sword over) It can be subtle, or obvious. Then offer the choice (hand it over or keep it) again.
(The goal of the second choice is to get them on-board with the idea of following the plot, by the way. The Judo here is to get them going in a direction, then hint that is the right direction, then throw them along the path they are going anyhow...)
Now the plot of the story is that Merlin was enslaved by Morgan (or Merlin was an illusion), and they convinced the players to steal Excalibur. The players chose not to hand it over. Then Morgan uses the lack of Excalibur to strike at Camelot and defeat the knights.
The dark forces of Morgan are now on the march. The players are not worthy of Excalibur, but they are the bearers of it. They must save the realm (or, at least, defeat Morgan).
If they choose (at first choice) to hand the sword over to the lady/stone, give them a hint again that it was the right choice, then offer them the choice again. Then we have a different story, where a corrupt Camelot is hunting down your party. They prove themselves worthy and draw Excalibur and defeat the corrupt Camelot, who allies with Morgan against the heros.
A side effect of this is that players might now start looking for your hints. You can now use this to guide the story down your preferred path, still leaving both possibilities open. Both stories are interesting ones.
You'll note I caused the plot to converge to some extent. That is because I'm lazy. And we'd still leave open the possibility that, in response to everything, the players simply flee England.
Which leads to a different story, with the fall of England to darkness in the background. Maybe the players found a kingdom in France, and eventually invade England to take back their home.