is there an app on Iphone that merges sms, email in 1 conversation stream?
Such an app does not exist, because Apps can not have access to the SMSs on the device, they can only display a user interface from which the user can send an SMS. 
At least this is the case for unjailbroken devices, such an app may exist for jailbroken devices, but if you do this you have to trust the app won't send/steal all your conversations to some server somewhere.

However you can search through all your SMSs, and email in spotlight search on the homescreen.