Can Deduper - Outlook Duplicate Remover merge duplicates?

Yes, Deduper supports merging. You can choose this option on “Removal Settings” > "Merging and Deleting".

Merging works in the following way - once two duplicate items are found (e.g. contact1 and contact2), if one item has some data (contact1 phone number) that is not on another (contact2), this data is copied to other item (contact1 phone number to contact2). But if both items have this data but it differs, no merging occurs. So, merging is a safe way to remove duplicates, which does not destroy any data.

Note: Attachment merging is not supported.