I have tried everything to get rid of the 'Unable to locate enchanting 'hair shirt' error that happens when you merge objects with TESTool.

I have the latest betas of MPP, I still have 1.6.5BTB in my mod list activated with the beta esms.

That didn't work.

I tried deactivating the 'more better clothes' mod and regenerating 'merged object.esp'

I then tried deactivating all better clothes mods.

I cannot get rid of the error and I am not that experienced with modding.

I am using MGSO3.

Is there any way others have got around this?

I really couldn't care less about clothes at this point, but MGSO3 installs those mods.

Probably the same problem is discussed http://www.gamesas.com/topic/1177482-best-practices-for-making-merged-objects/?p=23135373

What abot said. The error is caused by the BTB edit version of the patch. Either deactivate 1.6.5BTB or upgrade it to the latest version https://www.sendspace.com/file/i7tw2h, which does not have the issue.