I would like to be able to merge my duplicates with the advantage that the groups to which I have assigned one of the references will be kept so that the merged duplicate “covers” the group assignments of the previously independent references. In general I think that the duplicate management in Endnote really needs improvement. 

I concur! EndNote should have a merge duplicate function. While I understand that each record has to have a unique ID, why note allow a record to have more than one ID, e.g., in the case of a duplicate record. This way, older papers that used say citation record ID 3 and new papers that used citation record ID 56, can still have their citations properly displayed even though the user originally “messed up” by creating two records for the same book/article.

The citations should be merged in a manuscript, but this user is asking that they can be merged in the library.  Good idea, but different request.