Merge to a new document and use the replace function to remove the tags and
italicise the text - the following macro will do the job:

Sub ReplaceItalicTags()
   Selection.HomeKey Unit:=wdStory
   Selection.Find.ClearFormatting
   Selection.Find.Replacement.ClearFormatting
   With Selection.Find
       .Text = "\<i\>(*)\</i\>"
       .Replacement.Text = "\1"
       .Forward = True
       .Wrap = wdFindContinue
       .Format = True
       .MatchCase = False
       .MatchWholeWord = False
       .MatchAllWordForms = False
       .MatchSoundsLike = False
       .MatchWildcards = True
   End With
   Selection.Find.Execute replace:=wdReplaceAll
End Sub