In my experience Merlin can recognize known calls in very busy environments, like on a street with cars running, people talking and four different bird species screaming at once.
It doesn't require that. But the bird sound does need to be fairly prominent, so yep, somewhere not too noisy would be good.
Perhaps it's possible they could add a pre-filter that cancels selected birds. I often have squawky magpies and starlings that drown out the bird I really want to know about.