Merc didn't lose much on the straights. Race maximum speeds disclosed by FIA also suggest that. Nonetheless, there's a small deficit to Ferrari's PU in low RPM. That points rather to the energy recovery system, not the ICE, which is frozen.
The downwash created by those inlets may produce a lot of drag on straights and a peak downforce that is besides the point. It produces continuous downforce, leading to porpoising at high speeds. I don't think there's a correlation between the rear wing or a setup and the fundamental problem with drag.
As I see it, the main issue Mercedes will face is the lower crash structure. They could retain a small sidepod design If they have it under (inside, irl) the floor or, perhaps, let it hang like the mirror. Something in between the Barcelona specs with a small undercut, a concept closer to the early spec. Flip it?