1. What setting am I missing to merge these two?
Just recently, I've had these issues...

On my iPhone I have duplicate Calendar enteries.
Under "Calenders" there is the "On My iPhone" list
and there is the "My .Mac Account (MobileMe) list.

While I'm thinking they should be one in the same,
my iPhone thinks otherwise. How do I merge the two?

2. Also, when I use the lookup feature on the iPhone
I see duplicate listings of Contacts but my iPhone says
I have the same number of entries I've always had.

So it seem that MobileMe and my computer apps are
competing here too.

Never mind.
Found an article that gave me a solution.
I just blew up the .Mac (MobileMe) account and recreated it.
From that process you are asked if you want to merge, etc...

Welcome to the fun world of MobileMe...

No rhyme or reason for this to occur nor does this happen to every user.

It never happened to me until the 3.1.xx update.
Prior to that when I went through syncing with either
iCal, Address Book, iTunes or made an entry on the iPhone,
I was a happy camper, with no duplicates. Then....
Then triplicate...

chita , what was the article ??/ I have the same problem with two calendars

In essence of what the article says and what I did, was...
Delete the .Mac/MobileMe account on your iPhone.
When you recreate it, 'merge.'
About duplicate contacts and calendars on iPhone 3.0