This should be an optional feature for moderators. Mods from both communities must virtually shake hands and merge their communities into one. They could tweak how cross-moderation works. If one side becomes unmanageable, the other side can cut the line and split the community again.

Genuinely sounds like a solid idea to me. There are some lingering questions - both technical and non-technical - but they're fairly small. Such as:

1. How easy or hard is it to implement?
2. When communities merge, do their histories merge too or do only new posts show up to both? (My opinion: only new posts)
3. When a merged community splits, do both sides keep a full copy of the posts from the time they were merged, or do they delete the posts that were posted to the other community? (My opinion: keep the history)
4. Do they have to match everything - community description, exact wording of rules, graphics, exact name, etc - or do they just need to show each other's posts? (My opinion: just show each other's posts. It should basically be an automatic cross-post.)
5. Should Lemmy software make this apparent to users, or should the responsibility lie on the mods to make the announcement? This question could be asked separately for merge events, split events, and the merged steady state - i.e. should Lemmy show some info about it while the communities are merged. (My opinion: I think especially for splits, it's important to let the users know especially if the mods want to hide it. The other cases I think it could be left up to the mods, although it would do no harm if Lemmy let you know which communities are merged)

My opinion to those questions is what I think is the "right" way to do it, but I also suspect my opinions to 2-4 are the easiest to implement.