This was a very much asked for feature in Last.fm, which was implemented not very long ago.

Here's an example:
Some users tag "Arcade Fire", while others tag "The Arcade Fire". This is of course the same band, and they should be grouped to give a clearer impression of listening habits.

On Last.fm there are links saying: "Is this artist name wrong or misspelt? Suggest a correction."

At some point merging is done, on Libre.fm, this could be achieved by some sort of vote system.

Also, it would be incredible if it was taken into account that there often are more than one band with a particular name. A system where plays were analyzed and put in the right artist category would be nice. This analysis could be based upon user info on which tracks belong to which artist.

There will always be some errors with this, and some things that is hard to fix, but fixing most of it would be cool.