I want to import this mesh into TSRW, but I get an error that there are more groups than expected. I want to merge the groups in Milkshape, but I can't seem to figure out how. Does anyone know?

Tehre is a way, but like a way around of it. Select all the groups you have, go to the 'model' tag, click the select too where more possibilities will pop up and click 'group' now go back to the group tag and click the button 'regroup'. make sure the mesh is still red when you click the regroup button! ^-^