From the script of season one, episode four, Vatos, in the scene where Daryl, T-Dog, and Rick find the severed hand:
Daryl [to T-Dog]: "You got a do-rag or something?"
T-Dog hands him one.
Daryl: (sighs) "I guess the saw blade was too dull for the handcuffs."
Daryl gingerly picks Merle’s hand up by a finger and examines the cut.
Daryl: "Ain’t that a bitch."
The hacksaw blade was too dull to cut through metal, so Merle cut through flesh and bone, which are much softer. Better to cut off a hand than die of thirst, exposed on a scorching rooftop in Atlanta, during the summer.
In real life, handcuffs are (unsurprisingly) designed to be difficult to remove without the key, so it is entirely plausible that a dull hacksaw would be unable to cut off a pair of police cuffs.
It would be extremely difficult even for a person using both hands and a sharp hacksaw; Merle is limited to using one hand to operate the saw. If we assume he's a righty, he is even worse off, because it is his right hand that is chained to the roof - he can only use his weak hand to try to cut through hardened steel with a dull saw.