I got the rotation working.
It is vec_rotate, inserted with VECTOR temp1; and the switch from y and z in the following way:

Code:
for (iterate=0;iterate<vertices1;iterate++)	
		{
			temp1.x=vertex_buffer1[iterate].x;
			temp1.y=vertex_buffer1[iterate].z;
			temp1.z=vertex_buffer1[iterate].y;
			vec_rotate(temp1.x, source1.pan);
			
			merged_vertex_buffer[iterate].x=temp1.x;
			merged_vertex_buffer[iterate].y=temp1.z;
			merged_vertex_buffer[iterate].z=temp1.y;
			
			merged_vertex_buffer[iterate].u1=vertex_buffer1[iterate].u1;
			merged_vertex_buffer[iterate].v1=vertex_buffer1[iterate].v1;
			merged_vertex_buffer[iterate].u2=vertex_buffer1[iterate].u2;
			merged_vertex_buffer[iterate].v2=vertex_buffer1[iterate].v2;
			
		}
		
		offsetv+=vertices1;
		
		for (iterate=0;iterate<vertices2;iterate++)	
		{
			temp1.x=vertex_buffer1[iterate].x;
			temp1.y=vertex_buffer1[iterate].z;
			temp1.z=vertex_buffer1[iterate].y;
			vec_rotate(temp1.x, source2.pan);
			
			merged_vertex_buffer[iterate+offsetv].x=temp1.x;
			merged_vertex_buffer[iterate+offsetv].y=temp1.z;
			merged_vertex_buffer[iterate+offsetv].z=temp1.y;
			
			merged_vertex_buffer[iterate+offsetv].u1=vertex_buffer2[iterate].u1;
			merged_vertex_buffer[iterate+offsetv].v1=vertex_buffer2[iterate].v1;
			merged_vertex_buffer[iterate+offsetv].u2=vertex_buffer2[iterate].u2;
			merged_vertex_buffer[iterate+offsetv].v2=vertex_buffer2[iterate].v2;
			
		}