Does a gift from the merchant to my brother absolve him of the sin of usury, or must he dispose of the usurious interest he acquired, even after the merchant forgave him for it?

Lending with a stipulated interest is undoubtedly forbidden. Your brother must return the usurious interest to the merchant, because it is his money and was taken from him unjustly. If the merchant then gifts him this interest, there is no blame upon him for accepting it, according to the more preponderant opinion, as the merchant's right to his money permits him to dispose of it through gifting.