Why can I no longer Merge Contact records in 5.7.3?
So I looked at the civicrm email records of the two contacts that produce such an error and they look fine. 

Alan figured out that this is a bug: during the merge process when data is being gathered about both contacts, code is verifying that the value is valid, but it does so after converting it to an option value (i.e. email is "2").

A quick workaround for those struggling with the same issue - remove Preferred Method Email from Contacts. For this client this field is no longer used so we could just: 

update civicrm_contact set preferred_communication_method=NULL where preferred_communication_method=2;


Merges are working again - phew!