 Solution

For two proper lazy lists, twiddle alternates heads, swapping which list is served after each output. Thus both input positions have finite waiting time. A tempting extension is remalldups . foldr twiddle [], but arbitrary empty rows make that insufficient: for [ [1,2] ] ++ repeat [], it emits 1 and then demands the combination of infinitely many empty rows before it can return to 2.

Use diagonal merging of lazy lists to avoid that obstruction. Maintain a finite active collection, add at most one new row per round, and take one head from every nonempty active row. The supplied twiddle combines those singleton contributions into a finite batch:

union' = remalldups . rounds []

rounds [] [] = []
rounds active [] = emit active []
rounds active (row:rows) = emit (active ++ [row]) rows

emit active rows = batch ++ rounds tails rows
  where (batch, tails) = sweep active

sweep [] = ([], [])
sweep ([]:rows) = sweep rows
sweep ((x:xs):rows) = (twiddle [x] heads, xs:tails)
  where (heads, tails) = sweep rows

Here rounds takes the finite active collection first and the not-yet-introduced outer list second. Because heads is a finite list, twiddle [x] heads emits x followed by those heads; the finite batch is then completely consumed before the next round. Empty exhausted rows are removed by sweep. No step tries to combine infinitely many not-yet-introduced rows.

Index rows and positions from zero. Row $i$ is introduced in round $i$ and contributes its element $j$ in round $i+j$, if that element exists. Every earlier round inspects only finitely many rows. Therefore every occurrence has a finite emission time, proving fair enumeration. Applying first-occurrence duplicate removal givesAll outer and inner spines must be proper lazy lists and equality tests must terminate. Infinitely many empty rows after the final contribution still prevent certifying a terminating empty tail, just as part (c) predicts. Undefined input spines have the separate partial-list interleaving obstruction; the construction makes no promise to bypass them.