After merging, I mapped the unmerged reads against the reference, to see the results.
I see that pemerge can cope nicely with most of the overlaps, but once the reads overlap (the read goes into the adapter) completely, it fails :

Is this fixable ?

Could you provide a few examples? Thanks!

I'll see what I can com eup over the weekend. I can't give out the real data, it's unpublished.