Lady Avalon is an Arts support! You use her to support Arts Servants! Wow!
Despite how similar her kit is to Merlin’s, Proto Merlin is more of an in-between role splitting the difference between Tamamo and Reines. She provides less damage than Tamamo and more then Reines (usually), while she provides more charge than Tamamo and less than Reines (again, usually—overcharge, relative NP levels, and fight durations can swing both of these factors one way or another). Assuming you have a full support box, Proto Merlin’s value is significantly lessened. If what you want is damage, Tamamo has you covered. If you want charge and overcharge for Castoria, Reines does that better than Proto Merlin does.
Lady Avalon’s advantage is the specific mix of things she offers. She brings charge and overcharge (like Reines) while also bringing Arts buffs and healing (like Tamamo). She may not be the best at either, strictly speaking, but having both makes her a very safe choice for Arts stall, especially considering she also has a party invuln for emergency situations. Proto Merlin/DPS/Castoria is an extremely stable stall shell. It’s arguably the best in the game now, in fact, especially outside of the “pure” stall setup that is Merlin/Himiko/Castoria. Merlin/Morgan/Castoria mostly wastes Castoria’s Arts buff, where the Proto Merlin equivalent makes full use of both supports’ steroids and thus is likely to move faster assuming you’re using an appropriately strong DPS.
Arts is, fortunately, not hurting for strong damage-dealers to slot-in. It would be easier to name all the bad picks than all the good ones, and even then, the supports pull so much weight, weaker point Servants would probably still work well. Two particularly notable strong choices, though, are Beni-Enma and Lancer Ryouma. Beni gives partywide buff removal resistance, as well as some extra party charge, covering the one major gap in this shell and speeding the team up a little. Ryouma, meanwhile, brings big damage and some utility, while also providing a party overcharge buff that can be cycled with Lady Avalon’s to ensure Castoria is providing four hits of invuln every three turns, effectively negating any survival advantage Reines might bring.
Don’t have Castoria, or don’t want to bring her off support? No problem! Lady Avalon is a meta support in her own right, and while non-Castoria teams will be a lot weaker in relative terms, they can still be very strong with the right setup. Tamamo is a good partner for Lady Avalon, as Tamamo can help to alleviate Proto Merlin’s very long cooldowns. Tamamo/Proto Merlin teams are vulnerable to NPs on staggered or short cooldowns, as well as to powerful crits, but if you’re running a fight that’s short enough you can afford to lose people on an unlucky turn, they can work nicely together.
Cheaper supports can work, too! Mozart brings a lot of nice Arts buffs, for instance, and while he’s unlikely to live to use them twice, you can use a taunt CE to turn that weakness into an advantage, letting him take a turn of hits and die to make way for another party member. Proto Merlin also provides enough healing that a support with lots of defense buffs can be enough to keep the party alive until NP turns—Mash and Waver are obvious candidates. Reines also works well, as her NP’s overcharge buff helps Proto Merlin generate more stars, making her more likely to flood the field.
In non-Castoria teams, damage-dealers who bring party protection are especially valuable. For fights against enemies with ST NPs, or for fights where crits are the main threat, taunt-tanks like Fionn and Percival are especially great. Summer Erice actually also has a taunt-dodge combo, making her a great ST alternative to the two above. Summer Kiara, alternatively, has a partywide one-hit dodge, which she can cycle with Proto Merlin’s invuln to deal with enemy NPs.
It’s also worth mentioning again that Proto Merlin probably enables certain atypical farming setups, thanks to the passive charge on her NP. Even at NP5, Proto Merlin provides at most 40% total charge in farming contexts—10% going into waves 2 and 3, and 20% that can be used whenever—but the fact that that charge can be split over three waves and comes on a Servant who pushes Arts NP refund means there are Servants who will be able to loop certain combinations of enemies they couldn’t otherwise.
I’m not going to go into details on any of these comps, for a few reasons. First off, it would take a lot of time to find these specific situations, lay them out, and give all of their intricacies—and it would only be a small subset of examples anyway. I have a bunch of reviews to get through, and at least one of them (Ibuki’s) is going to be Long, so I’m eliding this in the interest of getting those out more promptly. Perhaps more importantly, though, those refund thresholds will be heavily dependent on Proto Merlin’s NP levels. If you’re going to invest in NP levels, you’re probably better off doing it for damage-dealers you know can loop (so that they can hit higher damage thresholds) rather than on a support who might sometimes enable damage-dealers you may or may not have to loop a little better. Loop setups that depend on Proto Merlin exist, but they aren’t really practical or important, so unless you’re really interested (in which case I’m sure someone else will do an in-depth breakdown of all the possibilities), you can pretty safely ignore Proto Merlin for farming, except as an alternative to Tamamo.
Lady Avalon doesn’t actually need starting charge in order to NP immediately, in most cases. I’d recommend taking advantage of that to the extent possible, which probably means running either Prisma Cosmos or 2030 for a CE. 2030 quickly pushes Proto Merlin’s star gen to levels at which incidental crits are pretty likely, while Prisma helps Lady Avalon NP even more frequently than she normally would.
Support CCs are the best pick for Lady Avalon, though the specifics are pretty open-ended. Buff removal CCs can be situationally handy, while NP damage CCs can be nice for helping the team move a little faster. Healing is also a solid choice, especially since Proto Merlin’s heals come in the form of max HP increases, meaning damage sustained can still be healed off.