Bradley.
Let me say first that this is a bit big a question for a public forum...I don't know how many people have time to do architectual review of this, especialy as hard to read the text without any line breaks as it is.
To answer, I suggest you look at a workflow, or a custom timer job that will merge the list items. You will have to be very careful in coding to make sure you dont lose information, as sharepoint lists are not a database with transactions...but on the other hand, even if you delete the list items, you can recover them from the recycle bin - so you should be safe.
Another option is to use infopath that has a built-in merge ability. have you looked into that?
How about it?