I recall a man-made structure (small dam) on the Merced river, as you finish the Mist trail before getting to the top of Nevada Falls.
Then I was reading this 1920 Guide to Yosemite and noticed the comment about the water cascading down.
http://www.yosemite.ca.us/library/guide_to_yosemite/yosemite_trails.html
"The rockslide to the left fell from the face of Liberty Cap in 1918. Fishing is fair from Diamond Cascade to Nevada Falls. The trail turns left and mounts 500 feet by the famous Nevada Falls Zigzags. When white men first visited Yosemite, part of the Merced descended in a cascade where the trail is now built. At the top of the switchbacks the trail to Little Yosemite, Clouds Rest, Tuolumne Meadows and Merced Lake (Trail Trips 13, 5, 8 and 7) continues up the canyon. There is here a government telephone (Central 1 ring). The new location of a refreshment stand and rest house in the vicinity is indicated by a sign."
Anyone know more about the story of that small dam or the diversion? I think one sees also water seeping down the rocks as you approach the top of the Nevada.