Consulta de combinación que devuelve ORA-30926:no se puede obtener un conjunto estable de filas en las tablas de origen

Probablemente tenga duplicados en los datos. DISTINCT no garantiza que tenga IdToUpdate único cuando lo usa con otras columnas. Ver:

CREATE TABLE #MyTable(IdToUpdate INT, LogSetIdToUpdateTo INT);

INSERT INTO #MyTable VALUES (1,1), (1,2), (2,1),(3,1);

SELECT DISTINCT IdToUpdate, LogSetIdToUpdateTo
FROM #MyTable;

LiveDemo

Obtendrá IdToUpdate dos veces. Comprueba tus datos:

with cte AS (
  select distinct nullLogSetId.Id as IdToUpdate,
                  knownLogSetId.LogSetId LogSetIdToUpdateTo
  from MyTable knownLogSetId 
  join MyTable nullLogSetId
    on knownLogSetId.IdentifierType = nullLogSetId.IdentifierType 
   and knownLogSetId.Identifier = nullLogSetId.Identifier 
  where 
    knownLogSetId.IdentifierType = 'DEF'
    and knownLogSetId.LogSetId >= 0 
    and nullLogSetId.LogSetId = -1
)
SELECT IdToUpdate, COUNT(*) AS c
FROM cte
GROUP BY IdToUpdate
HAVING COUNT(*) > 1;

Una forma de hacerlo es usar la función de agregación (MAX/MIN) en lugar de DISTINCT :

merge into MyTable
using
(

  select nullLogSetId.Id as IdToUpdate,
         MAX(knownLogSetId.LogSetId) AS LogSetIdToUpdateTo 
  from MyTable knownLogSetId 
  join MyTable nullLogSetId
    on knownLogSetId.IdentifierType = nullLogSetId.IdentifierType 
   and knownLogSetId.Identifier = nullLogSetId.Identifier 
  where 
    knownLogSetId.IdentifierType = 'DEF'
    and knownLogSetId.LogSetId >= 0 
    and nullLogSetId.LogSetId = -1
  GROUP BY nullLogSetId.Id
) on (Id = IdToUpdate)
when matched then
update set LogSetId = LogSetIdToUpdateTo