I still can't believe Merckx would say that. Perhaps he said he thinks that Armstrong is the best TDF rider of all time... even if Merckx said that I wouldn't agree with him.
I found this interview from a Belgian magazine:
http://www.bop.vgc.be/tijdschriften/wablieft/wab574/Wa574idk1.txt
For everyones convenience I translated this part
Q: Are you the greatest cyclist of all time?
EM: I was the best of my era. I dare say that, but I wouldn't want to compare myself with Fausto Coppi, Miguel Indurain, Bernard Hinault or Lance Armstrong. You have to be the best of your time, that's the most important thing. You can't compare the different times either. I rode almost all races, it was totally different from now. If I'd be riding now I might be doing the same thing as Armstrong. The TDF has became even more important. Armstrong is also making alot more money. We rode alot of races to make money, nowadays that's not needed anymore.
Q: Armstrong has beaten your TDF record - aswell as that of Anquetil, Hinault and Indurain - of 5 wins. Do you mind that?
EM: Not at all! Lance deserves that, he's a good friend. He came over for my birthday party. If I had done like him and only fixated on the Tour, I might have won more of them. But I don't regret. Cycling isn't just the TDF. There are many classics like Milan-Sanremo and Ronde van Vlaanderen, that I find more important. The Tour de France is getting way too much attention!