I looked into this a couple weeks ago as I'm tired of ISPS' bullshit.
Here's the pros for a merchant that I see:
* control over scrubbing
* better conversions
* control over customers/rebills
* MUCH lower fees
* offshore CB threshold is 2.5%
so please. I have never had a site with more than 0.8%.
Cons:
* fairly expensive startup cost
* most likely you will need to plan a trip to visit with the bank that will give you the merchant
* you need to have good history and transaction volume to apply for a merchant
* can't get a merchant if your business is "new".
* you'll have to buy a check printing machine and hire some dude to run to the post office with a bunch of checks to your affiliates.