What American dialects merge "pail" (General American /peɪ̯l/) and "pal" (GA /pæl/) into one pronunciation /pæl/?
(And likewise "mail", "male", "Mal" as /mæl/, "sale", "sail", "Sal" as /sæl/, etc.)
The merger you describe is plausible, but I have not been able to find any references about this neutralization in the context of American dialects. Perhaps it is understudied or has only begun to develop relatively recently.
I don't merge these, but I do use a noticeably different allophone of /eɪ/ before /l/: it's something like [eə̯], similar to the vowel I use in "Mary~marry~merry" (all merged) or the raised allophone of /æ/ I use before any nasal consonant (minus the nasalization). I also use something like [oə̯] for /oʊ/ before /l/. I don't remember seeing much discussion of this allophony, but I think it's common in other people that I hear in California and in the midwest. (To be more precise, these allophones are only used in a syllable that ends with /l/. They aren't used when there's a syllable division between the vowel and the /l/, so I have a contrast between the vowels in "scaly" /skeɪl.i/ [skeə̯li] and "grayly" /greɪ.li/ [greɪli], and "holy" /hoʊl.i/ [hoə̯li] and "slowly" /sloʊ.li/ [sloʊli].)
Wikipedia has information on two similar mergers:
While the first is geographically closer to the region you're interested in, the second seems more phonetically similar in my opinion to the change that you describe.
The only information about a merger of the TRAP and FACE sets before /l/ that I've found so far pertains to Cockney dialects with l-vocalization (Accents of English 2, by John C. Wells) and the result of the merger is transcribed as [æɤ]. The MOUTH vowel is also merged into this.
Vowels — all vowels in any dialect of English — have different allophones (pronunciation micro-variants) before resonants like /r/ and /l/. There are a lot of neutralizations, especially between tense and lax vowels.
For instance, very few speakers distinguish /u/ as in boot from /ʊ/ as in foot before /r/. Poor, tour, Coors, lurid, sure, cure, dour, during all have the same stressed vowel for most Americans; before /l/, however, there is a distinction between, say, wool and fool.
It’s likely to be unstable, though, unless there’s a common contrast.
It may well not be a merger. The Northern Cities Shift moves /æ/ to /eʲə/ or /iʲə/. A speaker who has shifted, when saying pal, will sound like they’re saying pail (or even peel) to a speaker who hasn't shifted. My son’s name is Ian /'iʲən/, but every once in a while when I say it, somebody who’s shifted hears it as Ann, a girl’s name, and asks about it.
Pronunciation changes don’t happen overnight, or over an entire district, like daylight saving time, you know. They take generations, and they confuse the folks who don't notice their vowels changing.