2nd Audio track from merged .m4v files does not play on iPod Touch

So basically, anytime I combine more than one mp4 file in QT7 Pro, it will always create multiple audio tracks when doing a simple "save as" (vs. export as)

Not exactly. QT has it own set of rules. As you noted, the video track had no problem merging into a single track. This would not have happened if you had merged video compressed differently or added an image/stretched image sequence. Not knowing your specific work flow or settings, I hesitate to make any claims here. Frankly, when merging audio, I normally prefer to use GarageBand when I want to create a single master audio track and still retain control of the other tracks for mixing purposes. However, I could just as well have exported the audio in the original file using QT Pro to a single audio file and used that audio track to replace both original tracks keeping both the original video and chapter tracks. It is all a matter of which work flow you consider easiest for a particular job or project.

If I've exported out my chapter file as a plain text file, how do I go about reintegrating that withing the final mp4 file using QT?
http://www.apple.com/quicktime/tutorials/chaptertracks.html
The above link is a somewhat old tutorial explaining how to create a chapter text track from scratch. Since you already have the chapter track, just refer to the steps indicating how to add the text file back to your main movie file. (Ignore the step that says to set a "Preload" option as this pop-up has been removed.)

Any suggestions?

Either key the file for alternate audio switching and manually change audio tracks when needed or combine alternate audio track 2 with primary audio track 1 so alternate audio track switching is not necessary. (I.e., iPod Touch only plays one video and one audio track simultaneously.)

Can this be accomplished without re-encoding the video/audio stream in order to maintain quality?

Video would not have to be re-compressed. As to the audio, that would depend on which work flow you decide to use. You can set up track switches using QT 7 Pro and not re-compress the audio but would have to manually switch track 1 to track 2 when playback of track one goes silent on the iPod Touch. You could also extract/convert the audio separately with QT 7 Pro and re-combine the merged audio with the original video using QT 7 Pro. Or, possibly even simpler, use the "Movie to MP4" export option to "pass through" the video while re-compressing the audio if, as you, the file "plays fine in QT." (I.e., this can be done using any application having access to the MP4 export option.)

How do I combine multiple audio tracks within QT?

As indicated above, this can be done manually in QT 7 Pro or automatically by any application the would re-compress or "flatten" the audio to a single track -- e.g., GarageBand can either "Movie to MP4" the file or use the "Full Quality" Share menu option to create a mixed track audio file with original video and audio tracks. Unwanted tracks could then be deleted as desired using QT 7 Pro. (In my opinion, the pass though work flow would probably be the cleanest/simplest method.)

That's the method I tried already (export out as MP4 while using video passthrough). I should have also mentioned that I wish to retain the chapter information as well

Unfortunately, that is a byproduct of the flattening process. Basically you have two options. 1) Re-chapter the file as part of the conversion/flattening process (e.g., using Garageband) or 2) use QT Pro, MetaDatatHootenanny, or a similar utility to save the chapter track as a plain text file for later reintegration once again using QT Pro, MetaDataHootenany, or similar utility.

How do you export the chapter tracks from an existing movie for me to use in a flattened movie?

See Step 3 in the tutorial. (I believe it assumes you are using a 29.97/30 fps frame rate.)

The "extracted" portion (the text track) would open in a new Player window. You would then "export" it (text with descriptors).
Language (English) has a value of 0 (zero). Remove the textEncoding part completely from the descriptors.