Dear SF Friends:
I have found it! The book is called Expecting Someone Taller, by Tom Holt, published in 1987. We have a dying badger (actually a Frost-Giant); a magic ring (the Ring of the Nibelungen); and a slew of Norse Gods. (I was wrong about Merlin, but what the hell.) Thanks to all who gave my question a look. I am new to the sfsite, and I am delighted that so many people participate in the forums.