Much like the arguments over who is who's child, sometimes the simplest answer is the most obvious.
The original ending of XC3 showed the worlds merged, hence why Noah started to hear Mio's flute. The ending of FR more overtly confirmed that ending, and then teased connections to the wider Xeno series of games.
Pragmatically if Origin enabled the two worlds to seamlessly combine, or if Origin allowed the worlds to explode and then recreate it into a new world, the end result for us is the same. There is a singular new world that has the combined worlds of XC1 & 2.
There is no reason to think the worlds didn't merge almost instantly. The cast of XC3 during their emotional goodbyes weren't sure when they'd see each other again but "promised that they would". The cast of XC3 doesn't overly remember the events of XC3 in this new world (be it created or merged), but Noah hearing and smiling at Mio's flute shows confirms for us the audience they're in the same world and will meet one day.
To circle back to what I first said, the reason I brought up the children is because XC3 and FR went almost out of it's way to confirm happy endings for virtually everyone except Melia lol with the heavily implied children. XC3 went out of it's way to say "don't worry shippers Rex made babies with all 3 of them", and went out of it's way to tease that Mio was one of those children (Nia's). FR quadrupled downed on this showing off the children of even more ships (Shulk/Fiora, Rex/Pyra, Zeke/Pandoria, Reyn/Sharla), the message is clear "everyone gets a happy ending except Melia lol . The worlds combined because that is what gives the XC3 cast the happy ending they fought for.