Maybe the SVN server you're referring to is of a version prior to 1.5?
Or the repository hasn't been updated after updating the server itself?
svn:mergeinfo is used by the merge tracking feature to keep track of which revisions have been merged WRT a file or a directory.
The error message you get seems to indicate a mismatch between your client's svn version and the version installed on the server.
Not sure about your second question. TortoiseSVN itself gives you 3 different possibilities: merge a range of revisions, reintegrate a branch and (I may be wrong here, I'm on Mac right now) merge two different trees.
You should probabily refer to the svnbook to really understand the difference between
svn merge
and
svn merge --reintegrate