Amanda,

If you run the schedule with the "Include xrefs" option, the plants will indeed be merged into a single schedule. However in order to this, the other plants will be added to the current project. So it all depends on what exactly you mean by "expanding" upon the original palette of project 1. If entirely new plants were added, then that could still be the host project to run the combined schedule. But if plants with the same Code were edited to have different parameters, then there's no ability to merge those two schedules perfectly.
One option would be to create a temporary third projects, to hold all the plants of both projects for the purpose of running the combined schedule.

--J