High tempdb disk I/O during merge replication of BLOBs
There is a TechNet blog that discusses some merge replication issues with blobs on a SQL Server 2008 or higher server.

http://blogs.technet.com/b/claudia_silva/archive/2011/10/31/replication-watch-out-for-stream-blob-columns-when-setting-up-replication-on-your-sql-2008-server.aspx

Note that the author cautions about which settings to use when there are SQL Server 2005 clients, such as you have.