Sql Server 2008r2 Replication Snapshot Agent Hang
I've not set up Merge Replication before but I do have a fair amount of experience working with Transactional and Snapshot Replication.

This gets me every time I set up a new Subscription or Publication.  Make sure your passwords are correct.  I will typically get this same type error every single time, then I have to go and test to make sure they are correct, and guess what, even though I thought I entered them correctly, I didn't.

A good test is to try to connect to the SQL server using the account/password you are using in the replication environment.  

Once you've made the change, if any, attempt to restart the desired replication agent.  I've occasionally had to restart the SQL Server Agent as well, if it was royally screwed up.

Hopefully this is a good starting place.  Best of luck in getting this resolved.

Regards,
Tom