Yes, you can create a new library with the option key. iTunes does not "look" inside any folder with the possible exception of "automatically add to iTunes". You have to actively add to iTunes to get it to recognize something is in your media folder. It then makes note of its existence in a special library.itl file and it is only with reference to this file that iTunes knows what you have in your library. If I give you a list of what is in your kitchen and you only ever look at that list then you won't know if I put another jar of peanutbutter on the shelf unless I tell you and you modify your list. That's how iTunes keeps track of things.
So yes, you can drag everything from one media folder to a new library and it will place new copies of the media added in that library's media folder (or drag to the Automatically Add To iTunes folder for that library and it will move those files while adding them). You can then drag media (all or some) from the second library to the new one you are creating. If you have a second copy of some of the same files it will add them too (so you will see duplicates) unless you omit them while adding the.
The bottom line is, there isn't any free solution to avoiding getting duplicates unless you don't have any in the first place (your second library is truly only new stuff not in the first one), or you are careful not to add them by being selective in what you add from the second library. There are various commercial ulitities that do various things, but I don't know how good any of them are.
Creating a new library will also reset date added and ratings.
