The merge process was unable to create a new generation at the 'Subscriber'.

The replication monitor shows no errors, and the agent appears to be stuck on "Uploading data changes to the Publisher."

After 30 mins the agent fails with the following message.

The merge process was unable to create a new generation at the 'Subscriber'.

I tried "update sysmergepublications set [generation_leveling_threshold] = 0"
on both Subscriber and Publisher, still it didn't work.

Then I tried "select count (*) from dbo.MSmerge_contents" and "select count (*) from dbo.MSmerge_genhistory" on the Subscriber

The both query was running indefinely with no results, instanly I realised there is some Locking problem.

In desperation I restarted the Subscriber Database Engine and started the Agent.

Magic! Replication was successfull.