I need to merge two repos using Gitolite, I recall seeing some instructions somewhere but can't find them.
Should the combining (merging) be done in Gitolite or on another machine?
Gitolite is only an authorization layer.
It is doing nothing more than allowing or denying git pull/push/clone
commands, based on authentication and VREFs (update hooks).
You can merge two repo locally with git commands (see "How do you merge two git repositories?"), and then push to your Gitolite server.
Gitolite will be used only to declare, if needed, a third repo to get the result of the merge (unless you are directly modifying one of the two repo with the other)