Do you have to install and run expanded Encounters before installing mod merge? I ran modmerge first and have looked in every file and cannot find Expanded Encounters anywhere. I have no chitin key as it has reverted to 'original' and I cannot open it; checked the root files & nothing there. Any help on what to do would be greatly appreciated.

You're in the wrong forum. This is the General Discussion subforum. Since your talking about modmerge and chitin key you're probably talking about Baldur's Gate Enhanced Edition? If so, the right subforum is here:

https://www.gog.com/forum/baldurs_gate_series

Modmerge should always be run first. I don't know how the chitin key can get lost, but it's not made to be opened yourself. If you messed up, better start from scratch: install BG:EE + SoD (or use verify integrity of files or whatever it's called inside Galaxy), copy the whole game over to a separate location if you're running inside Galaxy (or turn auto-update off), so Galaxy won't reset your modded install when updating BG:EE. Then place modmerge.exe into that new folder, run it and only then start modding.

I don't know of any Expanded Encounters by the way, can't help you with the specifics of that. But see above for the general start of modding the game and ask any subsequent question in the proper subforum. And prep for any answer here in the general discussion mentioning the wizard, it's an inside forum joke for people posting questions without mentioning any context as to what game it pertains to.