Thank you for the wonderful resources provided on your website. I'd like to know what the Red Nose advice is on merino wool clothing for newborns and if they can contribute to overheating.

Red Nose does not have specific information about particular fabrics.
However, the “warmer” or “heavier” the clothing or the greater amount of clothing/bedding the greater the risk of overheating, especially if baby is placed for sleep with head coverings.
Lightweight bedding is preferred.

Red Nose has the following information

Overheating can be caused by head and face covering, room heating, high body temperature and excessive clothing or bedding. To reduce the risk of this, we recommend that you, as your baby’s parent or carer, use your own judgement, taking into account factors such as the individual requirements of your baby, where you live (climate, whether it is summer or winter), whether you have heating in the house, and whether your baby has a cold or other illness (which may cause their temperature to rise).

https://rednose.org.au/article/how-much-bedding-does-baby-need