Hi Nameless, a good set of intelligent questions!
I've been playing 'Folks for a while, and lately I prefer the /G splash for Tarmo in order to better handle Zoo. However, I understand the desire to keep playing UU version and I support that.
So, is Coralhelm worth playing over Sovereign? Yes, definitely. Why? Because he gives you a way to break parity and fly over the ground-pounders (i.e. goyfs). One of the most vexing problems for Merfolk is that it has never had reach or 'inevitability' against decks not playing islands. Coralhelm Commander isn't perfect, but he can give you that reach to 'get there' when the board is clogged up with dudes. In my book, this is an invaluable ability in a deck that has never really had a good flyer before.
Wakethrasher? Not going to get there anymore. I love him more than most but he doesn't fill the holes that this deck has. Sovereign and Coralhelm easily outclass him.
Now on to your sideboard.
No, SoFI is no decent replacement for Jitte. Yes, it is worth buying another... Immediately. So buy one more, and then move them to the Main, especially if you are concerned about Zoo and Gobbos. Everybody likes to play this deck a little differently, so I won't insult you by telling you what to cut. Just do some testing, and it will come to you.
Now you have more slots in your SB. Propaganda can stay - but IMO it's better in the mirror than it will ever be against Gobs or Zoo. They will just REB it and carry on their merry way. But if you put Jittes main, you can rest assured that you already did one of the best possible things to improve these matchups.
Echoing Truth? Meh.... Why don't you try Submerge? I know it doesn't fill the same role but I really wouldn't play E. Truth for the reasons you are advancing. Submerge is so much better in most M/U's you should actually WORRY about.
Stifle is worth adding if you are concerned about Combo, most of the other decks playing a lot of fetches we murder already, so don't play them for that reason.
I would consider what you can do against Reanimator, if you expect to face it at all. This is not a great M/U for us. LLawan "I hate blue" Cephalid Empress is great against Inkwells, one of the worst creatures you could see on turn 1/2. She also happens to be nuts in the mirror and against Progenitus. AND she works off Vial. Everyone can debate all day about "better" cards like Curfew or Gilded Drake - the truth is they are better, but also much more narrow and useless outside of that M/U. I would give Llawan a good hard look, given how many decks she can totally rape and pillage like nobody's business.
That's my 2 cents... take what you like, ditch the rest, and do some serious testing. Good luck!

