Why would I pick a different reference frame?
Since you are free to pick any reference frame you like, it is a good idea to pick one where the maths is easiest. Something to bear in mind for later. It is very common to do relativistic collision calculations in the center of momentum reference frame, for eg., so you can exploit the symmetries. I suspect you are not expected to do that this time though.
In general, with anthing to do with relativty, it is best practice to have the reference frame in mind when you do the calculations.
Why would the equation not be useful?
The equation does not describe the system you are given. See below.
Einitial for one object plus Einitial for the second object = Mc^2
Um - E(mass 1) + E(mass 2) = E(final) would be correct, yes. But that's not what you wrote down.
You wrote:
mc^2/gamma +mc^2/ gamma=Mc^2
... which I read as: $$\frac{mc^2}{\gamma} + \frac{mc^2}{\gamma} = Mc^2$$... off which I can see:
- total energy of mass m is not ##mc^2/\gamma## ... you understand that total energy increases with speed? Yet these relations decrease with speed, so they must be incorrect.
- the two (initial) objects different masses and different speeds, but you wrote an equation giving them the same mass and speed. (Same variable name indicates same value and gamma depends on speed.)
The relations for total energy are: $$E_{tot} = \gamma mc^2 \\ E_{tot}^2 = m^2c^4 + p^2c^2$$ ... you should have these written down someplace.
You follow the usual method for conservation of energy and momentum, except that you are using the relativistic equations.
It helps to think of the maths as a language you can use to describe the situation you have.