I don't need to read up on it, I actually use it. I am the family organizer. I invited each of my family members to join the family group, which they did. When I added each member, Apple asked if I wanted to share my iCloud storage with them and I selected yes. This would mean that we are sharing a single iCloud plan. I pay for it, they use it.
Now maybe your understanding of iCloud is different than mine which would explain the miscommunication. However, if what you're saying is true, then there is a much more serious glitch whereby iOS 12 is telling users that they can share iCloud storage when they actually can't. I would be curious to know this.
Regardless, setting up multiple Apple IDs does not solve the iMessage merging on it's own. There's clearly some latent code that somehow still identifies a contact as being under a previous Apple ID.