I found this plugin: http://www.bubub.org/blog/bulk-renamemerge-categories-wordpress-plugin/
It does just want I would like it to do but it will not work with 2.7. The renaming part does but the merging bit doesn't.
I then found this plugin "Extend Categories Manager" (http://www.funponsel.com/blog/wordpress-plugins/) and this also does not work with 2.7.
Does anyone know of any other plugins that do merging and renaming of categories with 2.7?