Can I create images for Merch by Amazon?

Yup! To create an image the correct size for Merch by Amazon, chose the canvas sized called "Merch by Amazon - T-Shirt":

Once you've created your image and you're ready to download, make sure to choose PNG for Format, @2x / Retina option for Dimensions and then select Print (300dpi) for Media Type:

That's it! Your image is ready to be downloaded for use with Merch by Amazon.