Meritocracy is a fallacious idea exactly because it ignores social context. It's the equivalent of talking about spherical cows. Meritocracy not only assumes you can judge merit perfectly and that merit is expressed perfectly, but also that it is observed and rewarded perfectly. None of these is true and none of this can be true in any human society.

It's a lot like trying to reason about society as a network of perfectly rational actors making optimal decisions. The problem is not only imperfect knowledge and flawed decision making but personal biases on all sides, and not all of these biases are undesirable (unless you are looking for an optimum devoid of all externalities).

E.g. you could argue that insufficient risk taking is a failure to execute on your potential merit, but you may be risk averse because you lack a social safety net (e.g. wealthy parents) or because you have vulnerable dependents (e.g. a sick or disabled spouse, parent or child).

Meritocracy only works on an abstraction of what people are, but people can't be that simply because they're human animals with emotions, desires and needs. And this doesn't even go into undesirable biases like (unconscious) racism or sexism.

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Spoilers ahead:

That said, where a lot of surface level readings of the squid game (the game in the show) fail is that they take the Frontman at face value. The game is decidedly not meritocratic. To start with, the games are very much not a level playing field as the participants carry over advantages and disadvantages from their life outside the game (e.g. poor health, physical strength, age, etc). The games also intentionally disrupt any attempts at cooperation (e.g. by alternating between picking teams and picking opponents without making it clear which is which). Several participants even outright cheat or are aided by staff. And the penultimate game not only replaces any pretense of skill with pure chance but also changes the rules when one participant reveals a relevant skill. But more importantly than anything else, one of the participants is revealed to actually be the person who invented the game and participates freely, even beating (killing) other participants, but is spared the consequences (execution).

Not only is the society outside the game shown to be unjust and impact the pretense of meritocracy within the game, the Frontman actively sabotages a meritocratic victory in one of the games for the entertainment of the VIPs and one participant is exempt from all consequences because his wealth and status allows him to participate on his own terms and manipulate the other participants, skewing the results.

The participants don't volunteer to come back because the game is meritocratic, they come back because they think they have a chance. In fact ultimately the victor is a gambler who tried to win by uniting some of the weakest participants (though punished by having to cheat the seemingly most vulnerable person in order to survive), and a ruthless tactician willing to sacrifice everyone to get ahead but ultimately sacrificing himself out of regret. Heck, after weeding out most of the survivors in a blatant game of chance, one of the three finalists is gravely wounded (and consequently murdered) by sheer bad luck and we know that at least of the participants that made it to the game of chance got there by actively cheating their opponents (and at least one was "gifted" their place by another participant sacrificing themselves voluntarily).

If anything, the game demonstrates an environment intentionally set up to disrupt any attempt at solidarity (tho this idea was portrayed much more explicitly in The Platform) while blaming the individual for their failure in a system designed to prevent their success.