In some ways, the merchandising existed first--when he was writing Lucas always had the idea of making R2-D2 cookie jars and having action figures and such; merchandising was a key component of Forbidden Planet, Wizard of Oz, Planet of the Apes, etc., and Lucas wanted audiences to have that fun with Star Wars. But since the story didn't take shape long after Lucas started (re)writing, you might say that this merchandise vision pre-dates the version of the story that he actually started pursuing (circa late 1975).

The thing is, the whole notion of "selling out" is primarily based on whether or not you like the film that the anscillary products are based off of. If you love Star Wars, then its really, really fun to have Luke Skywalker underwear and Princess Leia shampoo. But if you hate Phantom Menace, it's annoying to have Jar Jar coloring books and Queen Amidala toothbrushes. The principle is exactly the same though. And Star Wars has never existed without it. The only difference is that the films weren't quite as good in the latter period. And I don't think it's because he doesn't care, I think he just doesn't have the same skill he once did. IMO it really comes down to that. But that's just my view--to people who liked Phantom Menace, it's great that you can have a Queen Amidala toothbrush for the same reason it was great in 1977 to have a Princess Leia shampoo. In principle, Lucas has been fairly consistent actually.