I'm still noodling a bit about this "differentiation" concept, and I have read excerpts you've pointed to Schnarch's writing. Is fusion akin to the codependent concept of enmeshmet?
Close. Enmeshment is one manifestation of emotional fusion. The other is avoidance.
In Bowenian Family Systems Theory, upon which Schnarch based his own work, differentiation of self is a balancing act between individuality and togetherness. In Bowen's eyes, enmeshment and avoidance were two sides of the same coin.
Avoidance was the byproduct of being so emotionally entangled with someone in a negative sense that one had to be physically distant. Closer proximity would produce intolerable levels of anxiety in the avoider.
I should note that the term differentiation of self is from Bowenian Theory, but the term fusion is something Schnarch coined. Bowen's work focused on relationships between family members. Schnarch's contribution was to suggest that the strength of intimate relationships and the quality of sex therein depended on the level of differentiation.