Does a syllable with a short vowel should be close?
According to Merriam-Webster, not necessarily:
damage, never: da-mij, ne-vər
According to American Heritage (also Cambridge), yes:
How should I decide?
Im not sure which Merriam-Webster dictionary you are citing here. Websters 3rd International Unabridged doesnt show any syllabication for damage or never. And the abridged Websters New Collegiate shows the same syllabication as does the American Heritage -- that is, with the short vowels in closed syllables.
However, your question raises a good issue: Both damage and never have short vowels where we would nomally expect long ones -- that is, at the stressed heads of vowel-consonant-vowel strings: <ama> in damage , and <eve> in never . VCV strings in English will generaly have long vowels as in words like dame, demon, diner, donor, etc. However, there are some more local rules that explain why some words like damage and never have short vowels in their VCV strings.
In the case of damage it is because damage was adapted from French. Hundreds of words adapted from French have short vowels in VCV strings because in French the words were stressed on the final syllable with an unstressed short first vowel, but as they were adapted into English, the stress shifted to the first syllable, which kept its short vowel, now stressed. Thus, a word like lemon is from French, with a short first vowel, but a word like demon is not from French and has a long first vowel.
Never is not from French; it is from Old English. And in general in English we avoid doubling the letter <v>. The reasons for this restraint are pretty complicated, but they have to do with the fact that we already have the letter double <u> that is, <w>.
You can find out more about the strings VCV and VCC if you click on View all Answers and then type control-F, and search on VCV. You can learn even more about these issues if you can get access to my book American English Spelling and go to sections 6.4.1 and 6.4.2.